Medvedev Backers Provoke Battle for Moscow, Mayor's Billionaire Wife Says

Backers of President Dmitry Medvedev’s re-election in 2012 are behind a campaign to unseat Yury Luzhkov because his loyalty isn’t guaranteed, said Yelena Baturina, the Moscow mayor’s billionaire wife.

“Several functionaries” in the Kremlin have ordered damaging media reports against Luzhkov to force Medvedev to fire the 73-year-old mayor, Baturina said in an interview published today in the Moscow-based news magazine The New Times. Baturina’s development company ZAO Inteco confirmed her comments.

“My father always said: if you tell someone for three years that he’s a pig, he’ll start to oink,” said Baturina, 47, referring to a second weekend of documentary-style films broadcast on national television blaming Luzhkov for corruption and favoritism toward his wife.

Luzhkov, who has weathered past clashes with the federal government, is facing his biggest challenge since becoming mayor of Europe’s largest city in 1992. The Russian capital is a crucial prize in any national election, and Luzhkov has consistently delivered the city for Medvedev and his predecessor Vladimir Putin, now prime minister.

Moscow Bond Sale

The possibility Luzhkov may support Putin instead of Medvedev in the run-up to the 2012 election is the reason people in the presidential administration want him removed, Baturina said. Natalya Timakova, Medvedev’s spokeswoman, didn’t answer repeated calls to her mobile phone.

The “media campaign” against Luzhkov hasn’t affected the city’s debt trading and won’t influence the results of a Sept. 22 auction, said Sergei Pakhomov, head of the capital’s state debt committee.

Moscow plans to sell 17 billion rubles ($547 million) of bonds due November 2015 at a yield of 7.4 percent to 7.48 percent in the auction, Pakhomov said by telephone today.

“This is an attempt to force him to make a decision that he isn’t ready to make because there’s simply no basis for it,” Baturina said, referring to Medvedev. “I don’t understand why both of the country’s top leaders are pretending that nothing is going on.”

It’s impossible for all sides to save face in the showdown over the mayor’s office, Baturina said.

Austrian Vacation

Luzhkov joins Baturina in Austria to celebrate his 74th birthday tomorrow, the mayor’s spokesman Sergei Tsoi said on Ekho Moskvy radio yesterday. Luzhkov is taking a week off after a meeting with the presidential administration, Kommersant reported today, citing an unidentified Kremlin official. He has been given time to contemplate his resignation, the Moscow-based newspaper said.

Luzhkov was prepared to step down two years ago after Medvedev said that any regional leaders who insisted on direct elections rather than being essentially appointed by the Kremlin should resign, according to Baturina. When Luzhkov approached the president with his resignation letter, Medvedev told him he had “completely other people in mind,” she said. Long-standing leaders of regions such as Tatarstan, Bashkortostan and Sverdlovsk have since left office.

Her family won’t leave Russia and will continue doing business even if Luzhkov is forced to step down, said Baturina, the only woman on Forbes magazine’s list of Russian billionaires.

‘Preferential Treatment’

Baturina said it’s “100 percent wrong” to think that there’s a conflict of interest between her husband’s position and her development business. Inteco won only one city building tender and was forced to abandon it because local authorities didn’t meet their obligations, according to the businesswoman. All of Inteco’s other deals were with the federal government or private people, she said.

“As long as I don’t break the law, I have the right to do what I do,” Baturina said. “I have no idea what preferential treatment I’m supposedly getting.”

Luzhkov said on Sept. 18 that he had never given special treatment to his wife’s company, RIA Novosti reported. He said Baturina would be “even richer” if she hadn’t been the mayor’s wife, the state-run news service reported.

Baturina said she’s been threatened with criminal cases “more than once” in her 20 years as Luzhkov’s spouse. If it goes that far this time, she said she’s prepared to seek justice in a court of law.

What’s disturbing about the conviction on fraud and tax evasion charges of Mikhail Khodorkovsky, once Russia’s richest man, is the “selectivity” of the case, she said. Baturina said she first met Khodorkovsky in 1987, when she and Luzhkov worked on the Moscow city committee on cooperatives, the Soviet Union’s belated experiment with free market capitalism.

To contact the reporter on this story: Lucian Kim in Moscow at lkim3@bloomberg.net

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