Leningrad's Aim: A Free Enterprise Citadel

City leaders plan to become a free zone for foreign firms and local entrepreneurs

IN marbled halls redolent with the pungent odor of mink, Soviet auctioneers sell the fabled furs of Russia to the highest foreign bidder. For almost 60 years, the annual fur auction in Leningrad's Palace of Fur has been an isolated island of capitalism in the communist sea. The fur market has been ``like a country by itself,'' says New York furrier Ernest Kremnitzer, who has been coming since 1954.

Now the newly installed radical leaders of this former imperial Russian capital propose to make the entire city a citadel of free enterprise. Leningrad, along with five other Russian cities and regions, was declared a ``free-enterprise zone'' by the Russian Republic's parliament on July 14.

The free-enterprise zones are only one more challenge to the Kremlin's centralized rule over the vast empire known as the Soviet Union. From cities to entire republics, such as the Russian Republic, impatient local governments are no longer waiting for Moscow's promised reforms but are going off on their own. In the tiny offices of the Leningrad Soviet building on St. Isaac's Square, mostly young dreamers and movers are already hard at work on a variety of schemes to make the enterprise-zone goal a reality.

The ideas floating around range from making the city a pacesetter in creating a market economy to what appear to be wild fantasies of separating Leningrad from the rest of the nation.

``We will have our own currency,'' Alexander Trubachev, a young people's deputy in the Lensoviet, or city council, excitedly tells visitors. ``For Leningraders, who will get money in Leningrad rubles, there will be Western goods in shops, goods produced in Leningrad, and goods produced in Russia, but only of the highest quality, paid for in Leningrad currency.''

As for those unfortunates from outside the zone, there will be ``special shops for `wooden rubles,' which will have supplies from other parts of Russia or partly from Leningrad,'' he says.

``The variety of goods will be lower and of lower quality,'' he adds, with evident disdain.

According to one version of this idea, the Leningrad ``currency'' will take the form of issuing special Eurocard credit cards to every Leningrader. The cards would be supported by a special regional ruble which is convertible into dollars and other hard currencies. The cards are ``substitutes for fencing off the free zone with barbed wire,'' says Lensoviet deputy Pyotr Filippov, one of the heads of the group formulating reform plans.

More conventionally, the Lensoviet seeks to move more rapidly toward a market economy than the timetable envisioned by the Gorbachev government in Moscow or even by the more radical government of the Russian Republic, headed by populist Boris Yeltsin. There are plans to establish a stock market and a labor exchange, to take over and break up all the state owned enterprises, and to legalize all forms of private property.

The Leningrad city fathers are quite consciously seeking to follow in the footsteps of Peter the Great, the Czar who built the city on marshes along the Baltic Sea as Russia's ``window to the West.'' They, too, are looking in that direction for foreign capital and trade. Foreign investors are welcomed and the city hopes to attract more dollar- and deutche mark-carrying tourists with modern shopping centers and maybe even a Leningrad branch of Disneyland.

The city offers two main attractions for investors, city officials say. It has a concentration of highly skilled workers and scientific researchers, drawn largely by high-technology defense and electronics industries that dominate the local economy.

And the classical Italian-designed architecture of Peter's Leningrad still displays its somewhat-faded charm along the canals and the banks of the River Neva, making it the largest tourist attraction in the country. From the great Hermitage Museum in the former czar's Winter Palace to the Smolny Institute, the boarding school that became the headquarters of the 1917 Bolshevik Revolution, ``Leningrad is a museum in itself,'' says Mr. Filippov.

The city is prepared to offer long term, 25-to-50 year, leases to foreign companies to set up offices and factories here, Filippov explains. An official sitting at the next desk, hearing this, hastily pulls out a portfolio of photos of beautiful but crumbling old Leningrad buildings being offered for lease, repair not included.

At present, the ministry of finance in Moscow must decide on all joint ventures with foreign companies. But, Filippov says defiantly, in the new Leningrad zone, ``all international economic relations will be liberated.'' The city will make those decisions, including on creating convertibility within the zone.

Now, ``the republics don't ask for rights - they take them themselves,'' the burly, bearded former editor of an economic journal says.

Like others here, he looks to the example of the neighboring Baltic republics, with whom Leningrad is discussing forming a common free-market area. The central government has only the power of armed forces to stop them, he argues.

``Do you think the ministry of finance would send such troops to get hold of Leningrad banks,'' he asks rhetorically.

The radicals came to power following elections in March which brought a two-thirds turnover in the membership of the Lensoviet. Anatoly Sobchak, an attractive and articulate law professor, became the mayor. Along with Gavril Popov, the radical mayor of Moscow who was elected at the same time, and Mr. Yeltsin, he is among the most popular Soviet politicians.

``Three months ago, there were two centers of power in this city,'' explains Leningrad sociologist Leonid Kesselman. ``The main one was in Smolny,'' where the Communist Party is still headquartered. ``Now we can say quite surely that center No. 1 is on St. Isaac's Square.''

Here, in the city named after Vladimir Lenin, people are leaving the Communist Party in large numbers, starting with Mayor Sobchak, who is now concluding a tour in the United States. Based on recent polls, Mr. Kesselman predicts that party membership will shrink from 600,000 members to 120,000 members by year-end.

The willingness of Leningraders to accept changes such as private property are six months to a year ahead of the rest of the country, Kesselman says, citing extensive polling results. This willingness stems in part from the deterioration of a city that used to pride itself on its well-preserved beauty and cleanliness.

``The city is half destroyed,'' Kesselman says. ``The main items of food can be found only with difficulties. They are not bought - they are being acquired.''

Polls and election results show that Muscovites are also more radicalized than the Soviet heartland, but Leningraders insist they are a breed apart.

``Citizens of Moscow and Leningrad are quite different peoples which by coincidence speak the same language,'' says Filippov, who frequents Moscow as a member of the Russian parliament.

Moscow, he says, ``is a city of cogs, a city of bureaucracy.'' Leningrad is a city of culture, of science, with a tradition of opposition to state authority.

With a ``free'' Leningrad, predicts Kesselman, ``we will have a situation in this city that the better you work, the better you will live. This is the strongest stimulus for change - not Yeltsin, not Sobchak, not Popov - that people feel everything depends on them.''