gave enterprise directors (and employees) in an enterprise the right to lease its assets; ultimately, these leased assets could be purchased at once or in installments through the cooperative or collective.<sup>4</sup> Subsequent decrees in 1989 and 1990 on lease and leasing relations expanded the ability of employees to propose lease arrangements. Although leases were meant to be awarded on a competitive basis, no competitions were held in practice, and nearly all leases were awarded by enterprise insiders to themselves.<sup>5</sup> Between 1991 and the end of 1992, the number of lease enterprises rose from 2,400 to almost 9,500.

The intent of the law, of course, was to decentralize the elaboration of annual plans. Indeed, at the time lease buy-outs were viewed by some as an embryonic form of privatization-one that, if regulated, might engender a smooth (stable, controlled) transition.6 They were, however, little more than profit-sharing arrangements for the management and employees. Buy-outs were often set up for arbitrage purposes-to secure inputs at subsidized prices, sell goods at uncontrolled prices, and pocket the difference. Directors thus reaped the benefits of their control rights while the costs and liabilities associated with ownership remained socialized.

When the Russian Privatization Law was passed in 1992, all lease enterprises whose agreements were entered into prior to the passage of the law were treated in a separate category of enterprise. In these circumstances, redemption was carried out as specified in the lease. But in an untold number of cases, the redemption terms were unclear or unspecified.<sup>7</sup> In these situations, lease enterprises were privatized with other enterprises, but leaseholders were given a "priority" in purchasing shares. Thus the overlap between enterprises privatized by voucher, and enterprise that were part of the leasing program is difficult to estimate.

Unlike enterprise directors in countries such as Czechoslovakia and Poland, where SOE reform laws enabled the Communist Party to remove under-performing managers as late as 1989, the USSR had no such opportunity. Here, enterprise insidersmanagers and employees-had both the incentive and the power to defend themselves against Yeltsin's attempts to reallocate property rights through rapid privatization. Workers, due to a paternalistic relationship under managers, the absence of labor markets, the lack of sectorally based trade unions, and the direct provision of social services by enterprises, did not constitute a distinctive group with interests opposed to management. On the contrary workers and managers were traditionally more or less 4 Leonid Grigoriev, "Ulterior Property Rights and Privatization: Even God Cannot Change the Past," in Anders Xslund, ed., _The Post-Soviet Econonmy: Soviet and Western Perspectives_ (London, Pinter, 1992), p. 200.

S Roman Frydman, _et al., The Privatization Process in Russia, Ukraine, and the Baltic States_ (London: CEU Press, 1993), pp. 20-22.

6See Igor Filatotchev, Trevor Buck, and Mike Wright, "Privatization and Buy-Outs in the USSR," _Soviet Studies_ 44, 2 (1992): 265-282.

7 Leases would run between five and fifteen years, and redemption clause simply allowed the lessor to purchase the property at the end of the term. But in many cases, the property sharing arrangements upon the conclusion of the lease were extremely vague-typically based on principles of self-government and worker participation, but leaving unspecified the governance structure of the enterprise.

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