by Neela Banerjee
Banerjee is a free-lance writer in Moscow.

Russia's new breed of capitalists seems to have learned an important lesson from their Communist predecessors: to run the country, it helps to run the press.

Independent media emerged in the old Soviet Union in the late 1980s, and for a few years produced hard-hitting coverage of news ranging from local police scandals to the disastrous war in Chechnya to government waste and corruption. But lately, much of the independent media has moved back under the control of the state and of business interests close to it. Tough coverage of anything is a rarity, and what little there is tends to be viewed as serving particular political or business agendas.

Over the last year, Russia's most formidable corporations have taken control of much of the national press. In 1996, the country's largest company, the natural-gas monopoly Gasprom, bought 30 percent of the private nationwide TV station, NTV. The powerful private lender Uneximbank this spring purchased 20 percent of Russia's most popular daily, Komsomolskaya Pravda, with a circulation of 1.25 million. Most recently, Uneximbank and LUKoil, the nation's biggest oil concern, divvied up ownership of the respected national daily Izvestia after a public battle that led to the ouster of most of the editorial board by the new owners.

For Russia's new media barons, the payoffs promise to be huge. In an economy still heavily controlled by the government, those who have become rich have been the insiders - companies and banks that were given a headstart on reforms when they were spun off from Soviet ministries. By acquiring the media, and with them the chance to shape public opinion, Russia's corporate giants strengthen their position. "In such circumstances," Sergei Agafonov, then foreign editor of Izvestia, wrote in April, "a free independent press is doomed, but an unfree and dependent press can flourish." By late July, Agafonov was out of a job.

The fight over Izvestia reveals how valuable the media are to big business. It also shows how Russia's editors themselves, through arrogance and bad business decisions, have pushed their media into the orbits of corporations.

 Once the flagship of the Communist press, the eighty-year-old Izvestia (News) fashioned itself into an independent, publicly held company after the Soviet Union fell apart. About 51 percent of the paper was owned by management and current and former employees, and most of the rest was in the hands of two local banks. Marginally profitable, Izvestia, with a daily circulation of 517,000, lacked the resources to expand.

 Most of the Russian press, especially outside Moscow, operates at a loss. Few publications have bothered to build marketing staffs to sell advertising, and hyperinflation during the early years of reform drove many advertisers out of business at the same time it drove distribution costs sky-high. Most print media received state subsidies for newsprint and distribution in the early 1990s, but as government resources dwindled, newspapers were willing to survive at any cost, including selling out to corporate buyers.

 "At this rate," says Vladimir Samarin, deputy editor of the small independent paper Orlovsky Vestnik in Oryol, 210 miles south of Moscow, "most of the independent press will soon be either back on the state dole or owned by big business." In Russia these days, "independent" means publications that don't have local administrations or powerful businesses as their backers. As Robert Coalson, an American who is an official of the nongovernmental National Press Institute research group, wrote in August in the English-language Moscow Times, "Russia's editors have continued the Soviet tradition of seeking out sponsors and producing newspapers oriented toward satisfying those sponsors."

 Before 1996, a few corporations had quietly acquired stakes in the media. It was the crucial role the press played in re-electing President Boris Yeltsin last year that triggered the recent corporate buying spree. Fearful that a Communist victory would mean the end of reforms, owners of the national media had their reporters campaign unabashedly for Yeltsin and give scant coverage to his Communist challenger, Gennady Zyuganov. Without such a media tilt, many believe, the president might have lost. He won handily.

After the election, the Yeltsin government rewarded its friends. Boris Berezovsky, a private businessman whose Logovaz oil and auto-sales conglomerate owns a sizable stake in Russian Public Television, was named deputy head of Russia's security council last fall. Vladimir Gusinsky, who owns MOST, a conglomerate of media, banking, and real-estate interests, quickly received state approval for his television station NTV to go nationwide and to launch a new cable TV venture.

Other big businesses caught on: owning the press and flaunting one's control over it spelled clout. Izvestia's editors, seeking to upgrade the paper, made a deal with LUKoil in late 1996: the oil concern bought the stakes held by the two local banks and committed to a $40 million investment over the next five years. But LUKoil was far from pleased last April when Izvestia reprinted a story from the French newspaper Le Monde alleging that Prime Minister Viktor Chernomyrdin had amassed a fortune of $5 billion by taking a cut of Russian oil and gas exports. Even detached observers thought it was irresponsible for Izvestia to reprint the Le Monde story rather than do its own reporting on such an incendiary issue.

 LUKoil, after threatening to sell its 41 percent stake because of the story, chose instead to buy more equity and take control of the board, with the aim of replacing the paper's top editors. Says Pyotr Neyev, head of investor relations at LUKoil: "I don't know what they expected. Let's face it: economics and politics are still too tightly joined in Russia. No matter how big the business, it's not fully independent of the government."

Unable to match LUKoil in a bidding war for the remaining equity, Izvestia's management recruited Russia's largest private lender, Uneximbank, as its financial partner. With the bank's help, the management acquired just over 50

 percent of Izvestia's shares. But the relationship with Uneximbank also proved too good to be true. Like LUKoil, Uneximbank has a long history of close ties to the Yeltsin government. Within two months of bankrolling Izvestia's defense against LUKoil, Uneximbank teamed up with the oil concern to oust the editor-in-chief, Igor Golembiovsky, and most other top editors, replacing them with lower-ranking Izvestia veterans.

 The stated reason was poor management of the paper by the old editors. Golembiovsky charges that the new shareholders are trying to remake Izvestia into a mouthpiece for their interests. "The newspaper will now be a loyal supporter of the government," he predicts. "They all saw what the press could do in last year's elections. Now, everyone is getting ready for the elections in 2000."

Since its recent media acquisitions, Uneximbank has launched an aggressive campaign to buy more stakes in privatized Russian companies. Controversy surrounding its latest acquisition, 25 percent of the telecommunications company Svaziinvest, has been reported in most media - but late, and with a spin favorable to the bank, in Izvestia.

 Golembiovsky and the other former Izvestia editors, meanwhile, appear undaunted by their defeat. With financing from "bank loans and advertising" - Golembiovsky won't say which banks - they plan to put out a new, five-day-a-week paper starting November 1. Its name: Noviye Izvestia - New News.

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