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#11 - JRL 7216
June 9, 2003
Optimistic Soros leaves Russia
By Aleksandra Petrachkova

Concluding his visit to Russia, the famous US financier George Soros wished the country greater success in corporate management, to rid itself of the resource curse and to press for the full convertibility of the rouble. It also looks like Soros has settled the question of Svyazinvests privatization so that his interests dont suffer.

The five-day visit of the US philanthropist and financier George Soros came to an end on Monday. The official reason of the visit was the 15th anniversary of Soros Open Society foundation and also an announcement about a reduction in the amount of financial aid allocated to the science and educational programmes in Russia. The reasons he gave should flatter Russia in 15 years the country was said to have made serious progress on the path towards a civil society and now, so Soros maintains, it is inappropriate to continue granting subsidies to the Russian state.

In general, Soros praised Russia at the press conference bringing his visit to an end. He noted an improvement in the corporate management of the country. At the same time, he warned against the creation of a corporate state, which he calls the simultaneous presence of the state and oligarchs, when it is hard to tell who controls who, and the state and oligarchs control all the markets in the economy. But in general, the famous financier was in an optimistic mood and said he hoped that Russia would develop in the right direction.

Possibly, this was the thesis Soros wanted to tell President Putin during a personal meeting. But, unlike Paul McCartney, the financier was not granted an audience.

The famous currency speculator believes that the Russian rouble can become fully convertible by 2008. Vladimir Putin set the task of making the national currency fully convertible within five years in his annual address to the Federal Assembly in May. Soros said he thought it was possible to make the rouble fully convertible by 2008 if the government wanted to do so. At the same time, the financier refused to forecast the rates of world currencies at the end of this year. ''I know the precise US dollar rate against the euro and thus, I cannot disclose this information,'' Soros said.

Soros named the ''resource curse'' as the major drawback of the Russian economy. He explained that because Russia is a country that possesses rich natural resources, a struggle for those resources is taking place. He noted that the phenomenon is dying out in other resource rich countries, but not so quickly in Russia.

The final extinguishing of the curse, Soros said, needs three steps: the publishing of reliable information about oil and mineral companies incomes, disclosure of the information about incomes in countries that suffer from the resource curse and disclosure of information on how the incomes from extracting the mineral resources are spent. It is interesting that Great Britain put forward a similar idea before the last G8 summit, but the ''cursed'' nations (which include not only Russia, but also the USA) pressed for the resolution not to be adopted.

And, of course, Soros did not forget about his own business interests during his visit. In Moscow, the US speculator had numerous meetings, including with the head of the Communications Ministry Leonid Reiman. The talks touched upon the further privatization of the Russian communications network Svyazinvest, the company in which Soros already owns a blocking stock. In one of his first public addresses Soros suggested that Svyazinvest should be divided into two regional companies, but did not say how exactly he planned to do it.

Nevertheless, it looks like Soros has reached certain agreements with the Russian authorities. At the closing press conference Soros announced that there was an idea to divide Svyazinvest into seven companies an idea he supported. Also, it was suggested that 75 percent minus one share of the company (which is all the state owns) be sold and Soros said he supported this idea as well. The financier made it clear that the sooner the government starts making concrete steps, the better. The time has come to make a decision, Soross surmised.

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