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Lebed's Opponent Crashed and So Has the Market

© Jeffrey Deutsch

Not unexpectedly, Alexander Lebed pulverized his opponent, incumbent Valery Zubov, to become the new Governor of the Krasnoyarsk region, with over 57% of the vote as opposed to just over 38% for Zubov.

The Communists played much less of a role than they would have had their regional leaders' instructions been consistent with those of the central party leadership in Moscow. Since it's generally believed that Krasnoyarsk is an accurate barometer of Russian political prospects, naturally everyone wants to fix that barometer. Some of the more recent elections (Duma elections in 1995 and the first round of the presidential elections in 1996) broke down almost exactly the same way in Krasnoyarsk as in Russia as a whole.

So, the Communists, in the belief that Lebed was their main obstacle to victory in the presidential elections of 2000, backed the Communist candidate Romanov in the first round of the gubernatorial elections. But while the Central Committee in Moscow directed the local Communists to support Zubov in the runoff election, regional leaders were telling Communists to stay home.

So, Lebed is getting his first real chance to strut his stuff while the Communists - and not for the first time this spring - are showing rifts in the ranks.

Take it straight from the horse's mouth: Communist Duma floor leader (and 1996 presidential candidate) Gennady Zyuganov publicly compared Lebed's rise to Yeltsin's rise to power against a weakened Gorbachev.

Lebed has a kick-ass-and-take-names reputation, and that may especially help with such things as tax collection, which isn't much better in Krasnoyarsk than in most of Russia (outside Moscow). (But, he has called for a two-year tax holiday on Norilsk Nickel, one of the country's largest nickel [and copper, cobalt and platinum group] firms, saying the tax holiday "would not require treasury funding". Apparently, his military training didn't include a course in basic economics. Think: Opportunity Cost.)

While the Kremlin may be mourning Lebed's rise to power, they have much more serious things on their minds: the ruble is down. Big time. The Central Bank is trying to avoid devaluing the ruble (that is, reducing the amount of foreign currency which can be purchased with the ruble), but so far, there are only two ways to do that: keep buying up rubles with foreign currency reserves (which of course are not infinite) and/or raise interest rates. The latter is a big problem for such a debtor country as Russia, but it seems unavoidable: the Central Bank raised interest rates to 50% on May 19. Then it raised them to 150% on May 27. (This keeps the ruble up, because it increases the demand for rubles so as to buy Russian bonds.)

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