ABSTRACT
The Russian capital, recently renovated and repainted, shows off its riches almost arrogantly. Ambitious building projects succeed one another. This chapter aims at deciphering the Moscow city government's realpolitik. Through carefully crafted legislation and a huge municipal police force, Luzhkov transformed a territory into an industry during the first years of Yeltsin's regime and began using his financial power to influence political decision making. The municipality denied such charges, arguing that privatization was crucial for financing the city's budget and that consequently the selling price of real estate could not be lowered. The financial weight of Sistema was considerable; it had capital of around $750 million by 1997. By establishing holding companies in all the profitable sectors, the city government maintains absolute control over the capital's economy. But its territorial jurisdiction is, of course, limited, and Moscow may well be facing the risk of overexpansion.
