Yeltsin's boy banker becomes a major player

0 Comments | Insight on the News, Jan 27, 1997 | by Gordon Feller

The banking interests that backed Boris Yeltsin wanted one of their own in his Cabinet, and they chose a young banker-businessman. What role he will play in freeing the Russian economy has vet to be determined.

In the newly reconstituted government created after Russian President Boris Yeltsin's reelection, one man stands out as more mysterious than even Gen. Aleksandr Lebed. This newcomer to the Cabinet of Prime Minister Viktor Chernomyrdin holds more than just the title of first deputy prime minister.

The mystery man is the youngest of all those around the table -- the only person ever to serve as a minister in the Russian Federation's government who actually started and ran a private Russian company. Vladimir Potanin, 35, already has proved himself an astute businessman, especially in connection with his bank's quick and inexpensive takeover of Norilsk Nickel one of the biggest companies in Russia. With the 1993 founding of the United Export-Import Bank, or Uneximbank, and its subsequent success, many lauded its chairman as a banking genius. However, as Russia's first deputy prime minister in charge of finance he faces a new challenge -- mastering the vast government apparatus. Potanin may have a natural talent for getting results, but he is no bureaucrat.

When Russia's new Cabinet was presented early last fall there were few surprises in the lineup. However, the appointment of Potanin reopened debate about appropriate relations between government and big business in Russia. According to Boris Fyodorov, Russia's former finance minister, Potanin rose to his position as a prominent member of the "Yeltsin group of bankers." This group gave "quite real" support to Yeltsin's campaign and had important reasons to place its own representatives in the Cabinet, "at least in order that no one could overturn the loans-for-shares auctions," Fyodorov says, referring to a controversial privatization deal a year ago which gave several banks, including Potanin's, control of Russia's largest companies.

It is not just the Russian banking lobby in general that he represents. One enormous issue is whether Potanin, who has a broad range of personal business interests through his Uneximbank, will abuse his power to win government favors. Potanin formally resigned as president of the bank, but he continues to hold his stock. Many suspect he will use his post to strengthen Uneximbank's hold on the economy. But bankers are indignant. They insist Potanin is much more than an insider receiving a high post for financial services rendered. They see him as a man with ideas.

"It takes a lot of effort to set up a bank, keep it afloat and raise it to the top level. By far not every person can succeed in this," says Sergei Yegorov president of the Association of Russian Banks. "Many would like to take a try. Potanin tried and succeeded."

Indeed. Potanin made Uneximbank, founded little more than three years ago, into Russia's leading private bank with an increasing international reputation. It has been argued that the success of this institution, which Potanin describes as "a commercial bank with a government mentality," is due chiefly to Potanin's links with the higher echelons of government power. But many observers say his appointment was a sign of new times in Russian politics. "He is a young man. He did not hold any posts in the old system," Yegorov says. "He thinks in a market economic way."

Leading Russian liberals see Potanin as an important asset for the reformist wing of government. "We understand each other perfectly well," reformist Economics Minister Yevgeny Yasin says of Potanin, adding that he would feel comfortable leaving the government in the near future knowing that the fate of economic reform is in good hands.

Potanin has been involved in some of the loudest Russian political and corporate battles of recent years. Yet, despite these widely publicized confrontations, the background of this publicity-shy banker and his financial-industrial empire partly is shrouded in mystery. Certainly the story of the irresistible rise of Uneximbank and of its sister institution, the International Financial Co., or MFK, cannot be separated from the story of Potanin's meteoric career. But little is known of the childhood and youth of Potanin except that he was born and grew up in Moscow. He studied at the prestigious Moscow State Institute for International Relations, or MGIMO, the traditional training ground for diplomats and other top government officials. He was an organizer of the Young Communist League, or KOMSOMOL, until he was graduated in 1983.

The MGIMO was an elite institution that attracted relatives of many of the Soviet-era bigwigs, including Andrei Brezhnev, grandson of former Soviet Premier Leonid Brezhnev, who graduated the same year as Potanin, Kommersant Daily says. After graduating Potanin went to work at a foreign-trade ministry, according to an official at the banking association. Here, Potanin began his career as an engineer but was promoted to a senior position dealing with trade in fertilizers and ore.