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#10 - JRL 7266
July 26, 2003
There's More to Big Business Than Oligarchs

The well publicized recent events concerning YUKOS, MENATEP, Base Element and a number of other leading Russian companies happened shortly after the National Strategy Council (SNS) - an organisation made up of leading Russian political analysts - published a paper on the threat of an oligarch coup in Russia. Arkady Volsky, the president of the Russian Union of Industrialists and Entrepreneurs (RSPP), believes that the two matters are directly connected.

Josif Diskin, one of the authors of the sensational paper and a co-chairman of the SNS, disagrees. He believes that the aims set out in the paper, which called for a public debate on the political influence of the oligarchs, did not extend to the legal sphere. The actions of the General Prosecutor's Office have astonished not just the oligarchs, but the authors of the paper themselves.

- Mr Diskin, Arkady Volsky recently announced that the campaign against big business in Russia began with the paper 'about the oligarchs' plot.' YUKOS was first, Base Element followed, and in Volsky's opinion law-enforcement agencies will go after big business in the regions next, which will lead to civil war. What is your reaction to this statement as one of the authors of the paper?

- I would ask Mr Volsky to take part of the responsibility for 'successfully' worsening relations between business and the government. Mr Volsky's famous letter to the president, which had the fingerprints of certain oligarchs all over it, played a part in this.

If you remember, Mr Volsky proposed some fairly extravagant measures: lowering the price of electricity for major consumers, using Russia's gold reserves for investment in selected projects etc. I think even the RSPP's board reacted quite cautiously to these initiatives; I know that there was a lot of debate about how appropriate these proposals were.

In my opinion, the government's reaction was a powerful argument for starting to investigate how strictly the oligarchs follow established rules for conducting business. That's the first thing.

I also believe that our paper could have aroused public debate of the extent to which the oligarchs are implementing national tasks, the extent to which they are economically, politically and socially responsible, and the extent to which this kind of economic development meets the country's interests. I believe the president is a rational and responsible person with extensive and varied political experience. Even if the paper was the trigger, Vladimir Putin is capable of understanding why we wrote the document and not just picking up on certain facts in it.

The president expressed his agreement with the paper. He said that big business was one thing and the political intrigues of the oligarchs another. He said that it was impossible to change the political structure of the country. But that doesn't mean that the problem has become so acute that it is felt by the president as well as us experts.

- It seems to me that you and your colleagues simply gathered material from freely available sources together in your paper. The process had been going on for a long time and the oligarchs hadn't bothered anyone. Why is it suddenly time for such a serious debate or legal action?

- You're quite right. The paper contained a systematic listing of well-known facts and drew up a picture of the role of oligarch groups, not big business, in modern Russia. We make a clear distinction between these two things and give a specific definition in our paper. As far as we are concerned, oligarchs are people who have a shadowy involvement in politics, 'buying up' the political, economic and regional landscape in Russia.

Various political forces are currently jockeying for position in the race to see who will follow Putin. The autumn's parliamentary elections will significantly influence who can compete to be President Putin's successor in 2008.

This question will be resolved in 2006-2007. By that time the number of candidates will have got much smaller. Our country has a nomenklatura, and it is clear which positions in the nomenklatura will provide an opportunity to fight to be the successor. These are speaker of the Duma and prime minister. These positions will be dependent on the make-up of the new parliament.

In 1999 the oligarchs hadn't yet pumped up their muscles and had no technology. There were also two groups in power who weren't ready to act independently. Now, the situation has changed. The STS has shown that the oligarch groups have become major players with enormous resources. They are all currently lining up for a place in the presidential electoral marathon.

If the oligarchs think they can play at politics without taking into account Putin's rules, that's one thing. If however, in exchange for wide-ranging economic freedom, they acknowledge that the president sets the rules in politics, that's another matter. The issue is not so much the ambitions of certain oligarchs, as the fact that they don't always take into account that their actions affect the political balance in the country.

- Isn't that a case of double standards? Businessmen with political interests can expect complaints from the authorities about their illegal actions in the past, whereas those who stay out of politics but also played a dubious role in privatisations have nothing to fear.

- As far as standards go, everything looks bad. I'm not entirely convinced by the actions of law-enforcement agencies which put a person in jail in a financial dispute. I think that those kinds of actions by the authorities represent a problem of standards. It seems that the president and prime minister share this point of view.

On the other hand, what criteria are there for standards? I think that the question should be put slightly differently. Unfortunately, individual moral standards are hard to apply to major historical issues. Our paper is not the reason why every social group in the country thinks that the current system is unfair.

I have often said that it's necessary to create a socially acceptable mechanism for underpinning the results of privatisation. The time limit for pressing charges in the main privatisation cases expires in the next few months. Maybe we've been looking in the wrong place for the reasons for the conflicts with YUKOS and other companies. Maybe they just want to get things done in time.

I have to admit that these kinds of motive are also dubious. Incidentally, our paper was as critical of the modern Russian state as it was of the oligarchs. Our conclusion is that it is completely incapable of maintaining a dialogue with big business. Recent events only serve to demonstrate this.

When looking at these kinds of cases you have to acknowledge that the choicest cuts of Russian industry were acquired in accordance with the law as it stood then. Sure, they were bought for a tenth or a twentieth of their real value, but that's a political issue, not a legal one. It was a political deal, not a business relationship. Of course, there was a lot of scheming, competitors were barred from auctions etc. A glance at a newspaper from that time demonstrates this. But that is not the issue.

The authorities are not mentioning the real problem, they aren't complaining to the oligarchs. Instead, they're hiding behind legally dubious actions that undermine their reputation and the belief that our country plays by the rules. Dissatisfaction with the oligarchs is a political issue and it's dangerous to tackle it with legal measures.

- You don't seem very happy with the turn events have taken since the paper was published.

- I'm disappointed not by the turn events have taken, but by the way the authorities have acted. These are two different things. In the paper we clearly state that our task is not to smash the window of Russian capitalism, but to nurture a new state.

- Do you want YUKOS to emerge safely from this mess?

- I have a high opinion of Mikhail Khodorkovsky himself, but I hope that the General Prosecutor's Office acts in full accordance with the law. There are plenty of questions for the Prosecutor's Office as well. I' m astonished that the Prosecutor's Office has acted against MENATEP over an issue that was settled peacefully but has not acted against the Russian Federal Property Fund and has not called for the Arbitration Court's decision to uphold the settlement to be overturned.

I think that many people who know how the legal system should be constructed will have wondered whose interests the Prosecutor's Office is representing: the state's interests, or the interests of some other political player? If the latter is the case, then it is an even bigger sin than the claims that we have made against the oligarchs.

- Mr Diskin, what is the state in Russia? Is it Vladimir Putin, who understands everything? Is it the bureaucrats who interpret and relay a vision of him to us?

- It's obvious that the state today does not consist of laws. This is made clear every time the Prosecutor's Office or any other law-enforcement agencies begin to behave in this way. We have a kind of 'convention' that is parallel to or above the law. The convention decides who the law applies to and to what extent it applies. It was like that under the Tsars and under the Communist Party secretary generals. And it's still like that today.

During these kind of disputes the convention is clarified and modernised, and it is propped up by the president. I don't think he actually realises to what extent what he says or doesn't say affects the convention.

I don't think it is right when Putin says that he doesn't approve of putting someone in prison and then looking for evidence, but doesn't say what he thinks of the Prosecutor's Office's actions. It's not a matter of interfering in the Prosecutor's work. He has the right to give a political assessment of its actions.

It's not necessary to discuss the legal arguments, but I want to stress that the General Prosecutor is nominated by the president and appointed by the Federation Council. If the president is not happy with the Prosecutor's work, he can raise the issue of whether the Prosecutor meets the requirements of his job.

- What do you think of predictions that Russia's investment rating will fall as a result of these events?

- It is already falling. Let's be honest, major Western companies realised long ago that it's not that important to obey the law in Russia if you have a strong and influential partner. BP decided to form an alliance with TNK because it realised that without TNK it wouldn't be able to solve many problems in Russia. There's no law for it to turn to without a partner. And then suddenly it becomes clear that even partners aren't all-powerful. The only reliable partners are 'politicians with stripes'.

The problem isn't that investment is falling, and it's not just that it has become more difficult to get cheap, long-term loans from the West. The problem is that it's a sign to big Western business that it should reorient itself towards other partners, towards countries where business works with business and doesn't set up relationships with officials and 'politicians in stripes.'

When preparing the paper, we expected a serious, rational debate about the country's long-term problems and the role of the oligarchs in solving them. We expected a discussion on what path Russia should take. Instead, we ended up with a domestic squabble, and all the problems remain.

- As far as I'm aware, your next paper will address the federal structure and federal relations in Russia. Do you think this may represent a 'sore point'?

- An extremely sore point! The cry of pain will be heard throughout Russia:

Interview by Igor Shatrov, Rosbalt, Moscow Translated by Robin Jones

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