Russia: Muscovites learn to love Luzhkov-onomics

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Russia: Muscovites learn to love Luzhkov-onomics

Regional governments are taking back control of local businesses in the name of saving jobs and preventing foreign speculators from taking over. While some observers regard this as an undesirable move, things could be worse. Renationalization, the bogey which haunted Russia's first few years of market reform, has melted away as the Kremlin moves to sell whatever mineral fortunes it has left. But relocalization is just gathering steam.

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Regional governments all over Russia are looking to repossess the manufacturing in their neighbourhood, under the banner of saving jobs and staving off rapacious speculators. In the east Siberian province of Krasnoyarsk, the governor's office fights Unexim Bank for control of a big metals smelter. The government of Tatarstan recently swapped tax debt for a controlling stake in Russia's largest truck maker, KamAZ.

But by far the most ambitious and influential state industrialist is Moscow mayor Yuri Luzhkov. Besides governing a raucous, crumbling capital of about 9 million people, Luzhkov actively manages two automotive companies, an oil refinery and a cluster of banks. He has commanded the currently moribund Moscow Stock Exchange (everyone trades over the counter) with the intention of transforming it in to the pre-eminent bourse between Tokyo and Frankfurt. To help it along, his Bank of Moscow recently bought 20% of the American-founded investment bank Troika Dialog.

During his five years in office, Luzhkov has proved himself a superior city manager. Granted that Moscow is one of the richest cities in Russia - with two-and-a-half times the tax-take per head of rival St Petersburg - improvements in municipal services are nonetheless startling.

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