#16 - JRL 7255
TITLE:
RADIO INTERVIEW WITH PRESIDENTIAL ECONOMIC ADVISER ANDREI ILLARIONOV
[EKHO MOSKVY RADIO, 15:00, JULY 14, 2003]
SOURCE: FEDERAL NEWS SERVICE (http://www.fednews.ru/)

Anchor: Good afternoon, we the journalists of course do not know anything but then we invite guests who are much more knowledgeable than ourselves and who understand much more than we do and we try to make them tell these things to you. Our guest is Andrei Nikolayevich Illarionov, adviser to Russian President on economic issues. Good afternoon, Andrei Nikolayevich.

Illarionov: Good afternoon, Alexei.

Anchor: Maybe I will begin not from the main thing but from the most acute thing because very many questions have come through the Internet system and questions are coming to the pager and probably our colleagues also have questions. Andrei Nikolayevich, over the past ten days certain maybe virtual changes have occurred, I have in mind the situation around Yukos and I have in mind above all the drop of the Russian Stock Exchange. Is it related? And here you are being reproached for not having expressed your opinion on this score although the situation around Yukos must have affected the Russian economy. Could you share with us your point of view and if I have additional questions, I will ask them concerning the things that have been happening over the past ten days? And what can be the consequences of all this?

Illarionov: Of course, there are many aspects to it and so we can go point by point. The situation is not the very best one, to put it mildly, the situation is not favorable and it is possible and it is necessary to analyze what has happened and why it has happened. And naturally we should draw conclusions for the future.

There are several points here. I would like to say something, to express my point of view. Firstly, regardless of whatever anyone does now, today, regardless of who did what yesterday, the day before yesterday and at any other time, everyone in the country should be equal in the eyes of the law. This is true of businessmen, this is true of state officials, representatives of state authority, this is true of any citizen of the country. That is why if any law enforcement authority have questions they would like to pose concerning violations of legality by any citizen of the country, these procedures can and must be applied to any citizen of the country. This is the basic, the fundamental thing of a normal, democratic, civilized society which we want to be. That's the first point.

That is why, if there are any questions to pose to anyone, these questions must be asked. It is true that it does not follow from this that if there is a question or questions to any individual man, this question should be "broadcast" to the organization in which that man is working or was working. And to link the activity of a particular person to the activity of a particular company, a particular organization, if there are no sufficient grounds, is not correct. This is actually the translating of an ill understood principle and it would mean that any person working in the government of the Russian Federation and who has found himself under investigation, and there are such people, this would automatically transmit everything onto the head of state which is wrong.

Any person who has committed a misdoing or a crime, working or who has worked in the presidential administration, sort of projects the crime into the head of state. This is wrong. We have a big organization, a big company in which tens of thousands of people work or even hundreds of thousands, and if there are no perfectly obvious links between the leadership of the company and some specific actions, then it is simply inadmissible to link the two things together, because it is not correct.

If we have grounds to assert that the particular leadership of the particular company was planning, and organizing and carried out a specific action, then such things should and must have been linked together. So far, as far as I am aware, nobody has asserted that this indeed happened. That is why if the crime is committed, the crime against life or health of Russian citizens, then it must beyond any doubt be investigated with the full observance of the law, with all due strictness in regard to all those suspected by the investigation and appropriate conclusions must be drawn.

That is why this is especially true in regard to criminal cases, crimes connected with the health and life of citizens. It should be quite unambiguous in this particular case. Now concerning the economic crimes. The situation in this area is much more complex and it is more complex in connection with that legal field that has never been perfect in this country and which over the past 15 years has been developing in quite a chaotic manner let us say. Much of what was happening in the country in recent years, was happening by far not in full accordance with either legislation or the notion of what is good or bad.

I will give you a concrete example, it is a well known example which was widely and repeatedly discussed in the Russian society and it relates to the security auctions of 1995. And from the legal standpoint there is quite a large number of questions, and from the economic point of view as well because those security auctions did damage to the country measured in tens of billions of dollars.

Nevertheless, this subject was widely discussed at that time, why this was happening, who organized this, in what way was this carried out. Be that as it may, damage was done to the country. And the question arises: now, what next? What is to be done today, in July 2003? In principle it could be possible and necessary to punish those guilty of what happened at that time. It would have been correct. But in that case, just in order to be consistent, one would have to review a large number of deals related to distribution and redistribution of property, carried out over the past 10-15 years. This would affect not only enterprises, not only the economic sphere but also the area of housing, the apartments of citizens. And in general, for us to be consistent, we would have to go further and in that case we should have looked through all the deals involving property that occurred in the Soviet years.

What decisions were taken by the Central Committee of the CPSU, by the Council of Ministers. What was turned over into whose property, was it legal or illegal and in that case we would have passed over to appropriations that were practiced in the time of the Civil War. And in that case we would have returned into 1917 and strictly speaking we would have returned to the situation that existed in January 1917 and review those deals. It is clear that this is a hypothetical procedure because the only thought about the nature of consequences that would have occurred, made it easy to imagine that it would just amount to a second edition of the Civil War with all the ensuing consequences.

That is why for any citizens and representatives of state authority quite a difficult dilemma arises as to what can be done in this situation. I would offer my own variant of resolving this problem. I lay no claim to this variant being perfect, I don't think there is an ideal variant in this case. And there is no variant that would resolve all the questions. I proceed from the principle of doing the least possible damage which is the principle by which economists tend to be guided and not only economists but also medics as this was advised by Hippocrates. This means: "Don't do harm, but if this cannot be avoided then the harm done should be minimum."

It would seem important to me that sooner or later some line would have to be drawn. One can agree as to where to draw that line, in what period of time and starting from a certain period of time one must act in line with the legislation that exists in the country, trying in a minimum way to get back to something that existed before. It is because either you will have to review all the deals which will just leave us to a national catastrophe and this is no exaggeration. Or if you don't review all the deals, then it is an example of a selective approach, of double standards. This is done in regard to some and this is not done in regard to others.

That is why a certain line will have to be drawn and starting from that line to try -- to the degree that the exercise is far from simple -- to live in accordance with the laws and rules. This is not an ideal solution.

Anchor: Is the word amnesty in order here?

Illarionov: No, I do not think...

Anchor: If you say that each deal had some legislation to rely on, a legislation with a hole in it or the deal was not quite honest...

Illarionov: No, I don't think that the term amnesty is a good one in this context. And in general I don't think the use of juridical terms is very correct. This is a question which is not so much juridical as it is one of general national accord or a question of general national consensus (but the consensus is very hard to obtain on this question, especially a nation-wide consensus). But nevertheless there should be some national arrangement.

Anchor: You mean a political arrangement?

Illarionov: Yes, a political arrangement because a country that has emerged from the period of civil war and we must use our own words -- we get out very heavily, very slowly, with very big problems from the period of the civil war. And the civil war in different periods took on different forms. And we had been in the state of civil war for almost the entire 20th century. The attempt to observe an absolute legal "purity" in all the formulations is quite sympathetic to me in all respects because it becomes clear what is white and what is black and in quite a number of cases such political and legal assessments should be made, especially and doubtlessly in all cases when it affects the life and health of people.

Anchor: I mean crimes.

Illarionov: I can say that the purges of 1937 need not only political but also juridical assessment because they relate to the destruction of people, the destruction of Russian citizens. In that case, regardless of the limitations, there is the juridical corpus delicti. And as regards other actions, it seems to me that here one needs to apply political solutions. And as it happened in the histories of other countries, they would conclude -- implicitly or explicitly -- some agreement, for instance in Spain it was the Moncloa Pact, a pact that essentially completed the quite painful and heavy and bloody period of civil war in Spain of the 1930s and of a "cold civil war" for 40 years after. Our situation is not in any way better, our situation is much worse. And that is why something similar might be undertaken. It is not by chance, by the way, that the topic of the Presidential Address in June and the topic of the meeting on Friday between the President and representatives of the public was devoted to consolidation. Consolidation not in the banal or, should I say, cheap meaning, with everyone waving the same flags and saying the same things. This is not the point. Different political forces espouse differing views -- this has always been the case and it should remain so.

But there are some things that we would like to see avoided. It is important to avoid the unfolding of a civil war in one shape or another. We have been on the brink of the abyss several times. It happened in 1991, in 1993 and as a matter of fact we were on the brink of an abyss in 1998 as a result of the extremely incompetent actions of the economic authorities. For a number of reasons we have during the past five years been gradually creeping back away from the edge of the abyss. As soon as we have put some distance between ourselves and the abyss there is again a wish to get back there because in an emergency situation you get an opportunity to bring off various tricks.

Anchor: It would seem that the pact was concluded between the President and big business back in 2000. We know that the decision not to revise the results of privatization is to come into force in 2004. Under the Civil Code the statute of limitations is ten years.

You have deliberately avoided the mention of Yukos in your speech. I would like you to explain to us the consequences and why these consequences. And why has the market reacted the way it has? If people have committed crimes -- the market is a very sensitive instrument, yes? -- so, why are the share prices falling? A thief's place is in jail and the market should continue. What will be the fallout? Perhaps, it is only a temporary hiccup and the market will soon shake it off and the people who have committed crimes will be in jail and the prosecutor's office will go on about its business. And in general, should the prosecutor's office be mindful of the market, for example? After all, the prosecutor's office is not an economic agent.

Illarionov: Let me tell you right off that the prosecutor's office should not be thinking about the market, it should be thinking, in accordance with its competence, about compliance with the law in the country. This is its first and main duty and it should deal with this. But compliance with the law is something that is focussed on the present time, the past too, but above all the present time.

So, it is important not only to draw a line under what happened, but to understand clearly what is happening in the country today. If today actions are taken that cause damage to the state and to the budget amounting to hundreds of millions and billions of dollars, but the Prosecutor General's Office does not react to it in any way, but at the same time reopens the cases and investigations into some past actions that allegedly caused damage, albeit on a much smaller scale, then the question suggests itself, is it accidental or is it a selective approach?

You have mentioned the capitalization of Yukos. Yes, during the last two weeks the capitalization of Yukos dropped by 20 percent and the company lost 5.5 billion dollars. This is a well known fact. But this happened as a result of the actions of the Prosecutor General's Office and I don't think the Prosecutor General's Office would deny it, in fact, I suspect that it would vaunt it as proof of its efficiency.

But we have a different example that I have repeatedly cited. We have before us the activities of the company RAO UES as a result of which the shares of that company dropped by 60 percent and losses amounted to 11 billion dollars. The state does not have a stake in Yukos. It is a private company. So, one can say that the Prosecutor General's Office has caused damage to private shareholders.

But in the case of RAO UES damage has been done not only to private shareholders, but also to the state which holds a controlling stake in RAO UES. And the state has sustained damage of about 6 billion dollars. These are beyond comparison to what rightly or wrongly is imputed to Yukos. But the Prosecutor General's Office has not issued any rulings on this case, no investigations are conducted. Even today, after RAO UES has allegedly appreciated its shares cost one half of what they cost five years ago when that team took over. Today it is twice as cheap. And these billions of dollars have been lost.

I don't know what happened in 1994 with Apatit. If somebody provides any proof -- but unfortunately neither the prosecutor's office nor Yukos have provided any information. Yukos denies any connection with Apatit, the Prosecutor General's Office denies it. The public has no knowledge of the background and further study is needed of this case. But what happened in the eyes of the public was the stealing of 750 million dollars of government money under the so-called "Czech debt" deal. It happened not in 1994, but in 2001 in broad daylight. An obscure firm backed by RAO UES in fact diverted 750 million dollars into its account. This is called stealing. And then 550 million dollars out of that sum lands in the accounts of the company RAO UES which in this case acts as a private company. This happened in broad daylight, newspapers even printed charts explaining how it happened, the Prosecutor General's Office passed no decisions on this and did not react in any way.

Anchor: So, you are hinting at a selective approach?

Illarionov: Well, one can hardly escape that impression because in one case it is happening now, today and not ten years ago. The sums are beyond comparison, the consequences -- for the country and the state -- are beyond comparison. One should distinguish between the state and the budget. In this case the budget was robbed of 750 million dollars. In the case of Yukos, well, the budget may miss some potential revenue and it may sustain some damage if there is a cut in production, but that is in the future. But in the case in point it has actually happened. The nation because 750 million dollars poorer because it had that money stolen from it. But the Prosecutor General's Office has done nothing about it.

So, it is hard to get away from the feeling that such actions are not entirely indiscriminate.

Anchor: Andrei Nikolayevich, one more question to finish with this topic.

Illarionov: And there is another thing, the third point, in fact, the fourth point, I wanted to make. First, I should say that there should be no statutes of limitations with regard to crimes, no matter who and when perpetrated them, whether a person is an ordinary citizen or a millionaire or a government officials. There are no statutes of limitations for crimes and any person who has committed a crime must be punished under the law.

Second, economic crimes. I think we should usefully draw a distinction between what happened up to a certain period and what is happening now. It doesn't matter where the line is drawn, in 1998, 1999 or 2000, but regarding what is happening now, the Russian laws should be applied relentlessly. Whether it is a barber shop, car filling station, RAO UES or whatever economic entity. Or Yukos, for that matter. They should all be treated equally.

Finally, the third part. I think if we were to look into the cases, including the cases that were in the past, I think, there is an important instrument of glasnost, of disclosure of information as to who and when took the decisions and what decisions. For example, it would be useful for the country, even if it does not lead to a criminal investigation, if the country knew and the media constantly reminded the public about who made the decision about loans-for-shares auctions? Who made the decision about the currency peg? Who made the decision to increase the country's foreign debt? These "heroes" must be named and shamed. Perhaps, they will not be convicted on criminal charges, but at least the country should know its "heroes", the people who caused it tens of billions of dollars of damage. The nation should know them and remember them.

Moreover, if the budget has obviously sustained losses, perhaps, an investigation would be useful not of businessmen, but of government officials. Because business by itself cannot do anything like it if it doesn't have the help of government officials who pass corresponding decisions, sign the relevant documents and these documents assume legal force.

I think that at least the names of such bureaucrats who commit such actions and their links to certain cases must be well known.

Anchor: Andrei Nikolayevich, we must stop there, but I have a question and I will ask it after the news when we have the "Ricochet" program.