Briefing for '98: Chubais to keep reforms coming

Russia was the world's best- performing stock market in 1997 as its benchmark index rose 209 per cent. Much of the credit for this belongs to the first deputy prime minister, Anatoli Chubais, the mastermind of President Boris Yeltsin's massive sale of state-owned assets.

Despite the success of Russia's privatisation programme and the strength of its stock market, however, the former academic emerged in 1997 as a hate figure in much of his country. Last November Mr Yeltsin was forced to demote Mr Chubais, stripping him of his job as finance minister. In an end-of-year radio address the president virtually singled out Mr Chubais for further attack, criticising reformers for "bouncing the country from one extremity to the other".

A question uppermost in foreign investors' minds in 1998 is whether Mr Chubais can survive politically. The odds are he can and will.

Mr Chubais is no stranger to adversity and he has been sacked before from the government, in 1995. But he was taken back during Mr Yeltsin's re-election campaign, in which he played a key role in uniting Russia's financial elite against the communists. But soon after Mr Yeltsin's electoral victory, Mr Chubais upset his power base - Russia's new commercial elite - by insisting that the privatisation process be moved on to embrace competitive tendering. This turned businessmen losing out in tenders into adversaries.

The key privatisation since Mr Yeltsin's re-election has been the sale of the state telecommunication giant Svyazinvest. The winner in that privatisation was Oneximbank, which was established in 1993. Its president is Vladimir Potanin, head of an empire of industrial companies, banks and media groups which have assets of approximately $36bn (pounds 22bn), equal to 10 per cent of Russia's gross domestic product.

When Oneximbank won 25 per cent of Svyazinvest, Mr Chubais was accused of favouring Mr Potanin in the privatisation. Then in November Mr Chubais and his aides were accused of taking fees for an unpublished book on Russian privatisation from a Swiss subsidiary of Oneximbank.

Mr Yeltsin sacked Mr Chubais' team, dismissed him as finance minister, but kept him on as first deputy prime minister. In the weeks following, rumours circulated in Moscow that Mr Chubais' days as a political force in the country were numbered.

Mr Chubais is detested by Russia's communist-dominated parliament, which has repeatedly called for his head. It now seems, however, that Mr Yeltsin has been playing a canny game designed to keep him in power. By half- sacking his key reform adviser and by publicly criticising him, Russia's president appears to have done enough to prevent Mr Chubais' adversaries from going for the kill.

The book scandal that nearly sank him last autumn is likely to fade as a memory in 1998, and with time he may make up lost ground. Even if Russia's economy suffers a setback in 1998, and Mr Yeltsin is forced to make Mr Chubais a scapegoat, his reforms will carry on.