#3 - JRL 7246
July 14, 2003
Putin Slams Big Business Lobbyists
By Catherine Belton
President Vladimir Putin tiptoed around the snowballing investigations against the owners of Yukos at a Kremlin meeting Friday, leaving the market and the nation none the wiser on how the politically charged case will play out.
But in a sign he would not back down in an attack that many see as punishment for Yukos owner Mikhail Khodorkovsky's attempts to put loyal deputies in the State Duma, he slammed big business for attempting to block the passage of reforms by lobbying the Duma.
"I am, of course, opposed to arm-twisting and jail cells. In general, I don't think this is the method to deal with economic crimes," he said in televised remarks from the meeting, which was attended by the heads of Duma factions, governors, Cabinet ministers, Kremlin aides and Arkady Volsky, the head of the Russian Union of Industrialists and Entrepreneurs, or RSPP.
During the meeting Volsky handed Putin a letter from the RSPP asking him to defuse the attack on Yukos, which the RSPP fears could set a precedent for undoing the results of past privatizations.
But Putin qualified his remarks against throwing people in jail for economic crimes by adding, "but at the same time we need to punish economic violations."
Friday's meeting had been much awaited as a chance for Putin to finally break more than a week of silence and clarify his position.
But Putin remained unscrutable even as prosecutors raided Yukos offices on Friday. The case, which began with the arrest July 2 of Yukos pointman Platon Lebedev on charges he stole state property in a 1994 privatization, has prompted mounting concern that the onslaught against the powerful oil major could spiral out of control and undermine the stability that has been the crowning achievement of Putin's term in office so far.
Lebedev, meanwhile, despite Putin's comments, remains locked in Lefortovo prison.
In a speech that did not once mention Yukos by name but nevertheless appeared to be laced with a carefully worded message to the business elite, Putin called on society to consolidate for a push to double GDP, bring an end to poverty and modernize the armed forces.
"A society split into small groups with their own narrow interests cannot concentrate on implementing major national projects," he said.
"It's not likely that we will be completely in agreement on all questions. But we will have to agree on all the main ways and work on a common position if we want to develop our country."
Yukos has come under fire as Mikhail Khodorkovsky, the company's main shareholder, has been seen to threaten those plans for consolidation.
Putin had agreed not to touch the corrupt gains made by the oligarchs in the skewed privatizations of the 1990s on the condition they stayed out of politics. But analysts say Khodorkovsky's financing of opposition parties in parliament threatened plans to form a Kremlin supermajority in the Duma next year and push through new reform bills, some of which, such as plans to increase taxation on the oil companies, Khodorkovsky-financed factions could oppose.
In remarks from the meeting shown on Rossia television Sunday evening, Putin spoke out against attempts by big business to lobby their interests in the Duma. He said he could not rule out that business groups could attempt to block legislation to levy greater royalty taxes for the use of natural resources.
"Even softer reforms are not getting passed by the Duma at the moment because those who are not interested in them getting passed are blocking them," he said, Interfax reported.
Putin said he had recently met with Duma Speaker Gennady Seleznyov, who had told him of all the problems big business was creating in the Duma. He quoted Seleznyov as telling him, "I am already getting sick of this, I can't keep quiet any longer. It's hard enough trying to take care of day-to-day goings on, but the things that business is up to in the hall just step over all boundaries."
What was broadcast of Putin's comments Friday did little to signal that the standoff could be over soon and, as such, did little to ease market jitters. The stock market plunged a further 3 percent Friday. "This was not what the market was looking for," said Stephen O'Sullivan, head of research at United Financial Group. The investigations "might have been intended as a shot across the bow for Khodorkovsky to remind him who is boss, but it may have got out of hand."
Trouble is, it is not clear which way Putin wants to go. Analysts say he has spent most of his presidency balancing two opposing factions: the oligarchs who made their fortunes during the Yeltsin era and his allies from the KGB and St. Petersburg. Now with what analysts say appears to be an all-out attack launched against the old oligarchic elite by the St. Petersburg group, the stakes have been raised in Putin's balancing game, and he may have to take sides.
One insider, Konstantin Remchukov, a lawmaker with the Union of Right Forces and the former head of the advisory board of Base Element, the holding company owned by metals tycoon Oleg Deripaska, fears Putin has already made his move.
"Such events do not happen without the say-so of Putin," he said "Within the Kremlin, his team was looking for a subject it could make a common enemy out of. The choice fell on the oligarchs. Without this common enemy, it's not clear why anyone would vote for [pro-Kremlin] United Russia."
RSPP executive secretary Igor Yurgens said Saturday that a campaign had started against the oligarchs when a report was issued in mid-June by the Council of National Strategy warning that Russia was "on the verge of a creeping oligarchic coup" that could seek to remove Putin from power.
"This campaign is very dangerous for the country," Interfax quoted him as saying on NTV's "Lichny Vklad" discussion program Saturday. "The idea is that the Communists are already not much of a threat, and you can't use this as the bugbear in this election campaign.
"So where's the threat? There it is -- the oligarchy, big business," Yurgens said.
During the meeting Grigory Yavlinsky, the leader of the Yabloko party, which is financed by Khodorkovsky, took a more conciliatory stance. In remarks to Putin that were later published on the Yabloko web site, he said the main aim for the country was to dismantle the "oligarchic economic system," which is still a "colossal brake" on economic growth and which is "always accompanied by poverty and corruption."
But he called on Putin to be careful in dismantling the system. "The first thing -- and this is a principal matter on which we insist -- is that it should be impossible to cancel the results of privatization and redistribute property using repressive means."
Economic Development and Trade Minister German Gref, also speaking on "Lichny Vklad," again attempted to calm fears that the Yukos case could spark a new redistribution of property. "It's absolutely definite that there are no such plans, either in the government or in the president's team," he said, Interfax reported.
But Boris Nemtsov, leader of the Union of Right Forces, which has also received funding from Khodorkovsky, said in an interview on Ekho Moskvy radio Friday that he was worried by Putin's silence on privatization during the meeting.
"A re-examination [of privatization results] is the way toward confrontation, toward pumping money out of one business structure into the pocket of another. It means capital flight, the loss of millions of work places and plunging the country into poverty," he said, Interfax reported.