Putin offers new deal to nation’s oligarchs

Nov 27, 2003 01:00 AM

by Alla Startseva and Catherine Belton

President Vladimir Putin offered Russia's leading executives a new deal that few are likely to refuse: share your wealth or risk losing it. The state, Putin told nearly 800 business leaders from across the nation, will work to strengthen property rights and reduce bureaucracy, but businesses must "fully recognize their social duties" by sharing their wealth and helping to reduce poverty.
"Businesses must aim their efforts at developing a system of new social guarantees for the population in line with the new demands of the time," Putin told a packed Hall of Columns in the House of Unions that included at least five billionaires. "We must join forces to make the lives of people economically sound so that they have plenty to live on."

The meeting, organized by RSPP, the nation's biggest business lobby, was first requested in the hours after the Oct. 25 arrest at gunpoint of Yukos founder Mikhail Khodorkovsky. At the time, RSPP said that Russia would face a potentially calamitous crisis of confidence in the economy if Putin didn't meet with top executives to clarify his position on the legal assault on Yukos. Putin flatly rejected the offer.
Since then, however, Khodorkovsky has been denied bail, Deputy Prime Minister Alexei Kudrin has trumpeted "the end of the oligarchy," unrelenting prosecutors have publicly warned all businessmen to toe the line, and the leading pro-business voice in the Kremlin, Alexander Voloshin, has been replaced.

The result has been that the once-heated rhetoric coming from the so-called union of oligarchs has given way to cowed deference. In fact, neither Putin nor executives mentioned Khodorkovsky or Yukos by name during the union's annual congress.
Metals-to-banking tycoon Vladimir Potanin explained the RSPP's decision to not press Putin publicly about Khodorkovsky, who still sits on the union's governing council, this way: "There is a level of detail into which you can go with the president, and one into which you had better not go. Today the president clearly stated that there should be a line between business and power. Many of my colleagues and I understand this and we don't intend to cross this line," Potanin said.

Indeed, one by one, nearly all of the nation's leading business figures in the last few weeks have declined to come to Khodorkovsky's defence. One exception is Unified Energy Systems chief Anatoly Chubais, who has been called the father of the oligarchs for overseeing the rigged privatisation auctions that formed the basis for most of their fortunes.
Conspicuously absent from congress, Chubais chose instead to attend, together with Prime Minister Mikhail Kasyanov, the grand opening of the second unit of a hydropower plant in the Siberian town of Nizhnevartovsk. Both men have railed against the way prosecutors have handled the investigations into Yukos and its top shareholders, with Kasyanov suggesting that the Justice Ministry should take over control of the nominally independent General Prosecutor's Office. He also said he had ordered the Natural Resources Ministry's to end its aggressive review of Yukos' drilling rights, which he called "intolerable."

Political analysts said Kasyanov is unlikely to keep his post if Putin wins re-election in March, as expected, while Chubais is the only major business figure campaigning for a political party, the Khodorkovsky-funded Union of Right Forces, in the State Duma race.
"Kasyanov has nothing to lose. He understands he won't keep his chair in the new Cabinet anyway and is showing off now his will to protect oligarchs," said Vladimir Pribylovsky, president of the Panorama think tank. Everyone else, said Alexei Makarkin of the Centre for Political Technologies, is afraid of the Kremlin's tough new line.
"The Kremlin as never before demonstrated so strongly that it did not want to discuss anything with big business," Makarkin said, referring to the three-week period in which Putin refused to meet with a business community in shock with Khodorkovsky's arrest.

Even Oleg Deripaska, the publicity-shy Russian aluminium magnate, made a point of distancing himself from Khodorkovsky. When asked what would happen to the former Yukos chief, Deripaska said bluntly, "I don't care."
"He's a good guy, and personally I have a lot of sympathy for him, but I couldn't understand what they were struggling for. I'm surprised Khodorkovsky did this. ... After all he's a very rich man."
Another billionaire who attended the meeting, metals and oil tycoon Viktor Vekselberg, echoed Deripaska's remarks. "I see the problem of Khodorkovsky as his personal problem," he told.

So much has the pitched rhetoric been toned down that Putin first addressed RSPP members as colleagues, but by the end of the session they were "friends," according to union chief Arkady Volsky. And despite his staunch defence of the attack on Yukos, Putin seemed anxious to contain tensions with the business community, insisting yet again that it did not presage a "deprivatisation" campaign.
"Any criminal case involving the world of business gives rise to suspicions and alarm, because a thought always arises whether there won't be a return to the past. There will not be, it is impossible," Putin said in remarks that received enthusiastic applause.

Analysts say the attack on Khodorkovsky was a reaction to his bid for greater political power at a time when Putin is determined to consolidate his own power base and wipe out any alternative sources of influence. Combined, the political power grab by Putin and the prospect of property being returned to the state led many to speculate Russia was returning to its Soviet past. In the address, however, Putin dismissed such fears, saying that a new level of cooperation between business and the state is needed.
"Business and the authorities will not only continue their dialog with each other, but, more than that, they, in my view, are duty-bound to work together and will work together to develop Russia, to modernize the Russian economy, to make our country stronger, richer and more prosperous," Putin told applauding businessmen.

But the speed and intensity of the attack on the financial empire of Russia's richest man made it clear that businesses had to engage in dialog with the Kremlin on Putin's terms, not there own, said metals baron Oleg Kiselyov.
"It is clear that businesses must cooperate with the state or it will be impossible for them to exist," he said.
In laying out the new deal, Putin agreed with businesses that security forces should not be used in settling business disputes, but he said businesses were acting in a similarly negative fashion.
"It's often hard to understand where the government ends and business begins, where business ends and the government begins," Putin said.

In what seemed to be a direct attack on Yukos, he lashed out at some businesses that, he said, were "lobbying their interests through the government so that their competitors get hurt."
"We are coming to a point that whoever pays moreto his majesty the bureaucrat gets his way," a visibly angry Putin said. Volsky said RSPP got the picture -- business will take on the responsibility for wage hikes and other social issues while the state conducts full-scale tax reform and insures property rights are upheld.

Source: The Moscow Times
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