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RIA Novosti
July 15, 2003
By Marina SHAKINA, RIA Novosti political analyst

The developments around the oil giant YUKOS have become political hot news in July in Russia. It all began with the arrest on July 2 of Platon Lebedev, one of the company's owners, who was accused by the Prosecutor-General's Office of embezzling budget money during the privatisation of the Apatit enterprise in 1994. It then emerged that the prosecutor's office was investigating several more cases involving high-ranking YUKOS officials suspected of criminal offences. Verification of the company's tax payments has begun.

There has been a mixed reaction to the YUKOS situation. The wider sections of the population rather approve of the authorities' moves. The wildcat privatisation of the early '90s in Russia has not been forgotten by the population. Most Russians are convinced that all latter-day large properties in Russia have been obtained by criminal means, i.e. by plundering the state and the people.

Over recent months, while world oil prices have been riding high and oil

companies enjoying superprofits, discussions have intensified in Russia about the need to introduce "rent on nature". Many people in the country cannot accept the fact that the oil tycoons wax fat by selling natural riches of the country, which belong to the whole population. Roman Abramovich's purchase of the

British football club Chelsea, just "for fun" as he put it, caused a certain degree of public indignation. According to the business newspaper Vedomosti, "a campaign has been launched throughout the country to condemn big business as such".

Significantly enough, when the Ekho Moskvy radio station ran a poll 73 per cent of its listeners were in favour of revising the privatisation of major industrial facilities. Mind you, Ekho Moskvy is the favourite station of a liberal minded section of society.

The business elite is most alarmed and worried by the YUKOS affair. Kakha Bendukidze, director-general of United Heavy Machineries and a leading Russian entrepreneur, said that developments around YUKOS have wiped 10 billion dollars off the Russian stock market, and that the economy has suffered damage incomparable to the sum Lebedev supposedly failed to pay the budget. "It is a blow to the Russian economy," Boris Nemtsov, leader of the Union of Right Forces, echoed the businessman.

The Russian Union of Industrialists and Entrepreneurs, a corporate business organisation, has sent President Putin a letter, asking him to maintain political stability in the country. Captains of the national business today indirectly acknowledge that privatisation in the '90s was conducted on shaky legal grounds, and that there were some irregularities. Such an admission, for example, was made in a speech by Vladimir Potanin, the owner of the Interros industrial holding, at a congress of United Russia party supporters at the end of June. "The character of Russian privatisation is not a secret to anyone. Such charges can be leveled against virtually everyone," remarked Sergei Ivanenko, a leader of the democratic party of Yabloko.

How can the contradiction between the primary accumulation of capital and the interests of economic development be resolved? Most political scientists and businessmen in Russia are inclined to think that a line should be drawn under the past of Russian capitalism. Society and business should agree that the legality of the privatisation deals of the '90s in Russia should be left alone, and a new chapter in relations between business and authorities begun.

Moreover, this social contract should be formalised as a legal act. The authorities and business in Russia have often concluded secret treaties of "non-aggression". But as the YUKOS episode shows, individual deals done behind society's back often misfire. The likelihood of such a social contract being signed is, however, problematic, as not all political forces in Russia are ready to make peace with big-time capital.

Another aspect of the problem that has not escaped commentators' attention is the approaching parliamentary and presidential elections in Russia. The law enforcement attack on YUKOS has been explained by many analysts as boiling down to the increased political activity of YUKOS head Mikhail Khodorkovsky. In general, big business pressure on parliament deputies and its resistance to the adoption of socially meaningful laws is increasingly annoying the country's leadership. Indeed, a clear signal to that effect was given by President Putin at his meeting with political party leaders on July 11.

Recent rumours concentrate on the presidential ambitions of the YUKOS head, which, however, Khodorkovsky denies. But he does not deny that his sympathies among political parties lie with the Union of Right Forces and Yabloko, and that he backs them personally.

Experts view the conflict as having favourable prospects; they believe the affair will be put on the backburner after the elections. But over-active appeals to the "overseas parties" and attempts by, for example, the US administration to exert pressure on the Russian authorities in favour of YUKOS may only harm both the company and business.

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