#1 - JRL 7269
Russia's super-rich offer to pay more taxes
July 30, 2003
By Larisa Sayenko

MOSCOW (Reuters) - Russia's big business leaders, alarmed at a legal probe into oil giant YUKOS, offered Wednesday to pay more in taxes and pump more cash into charities to help defuse tension with the Kremlin.

After a meeting in Moscow Arkady Volsky, the president of the industrialists and entrepreneurs union, said big business leaders, who include many of Russia's billionaire "super-rich," had agreed to get involved in President Vladimir Putin's campaign against poverty.

"I might be speaking a little prematurely about this, but we -- big business -- agreed to share with the state, especially on the level of overcoming poverty, the tasks set out by Putin," he told journalists.

The comments from Russia's "oligarchs" sought to improve the political atmosphere following the YUKOS inquiry and the arrest of a major Yukos shareholder on theft and tax evasion charges that have spooked the post-Soviet new-rich class.

The affair has hit the oil company's stock price and raised fears among foreign investors of capital flight and political instability in the country.

Volsky, head of what is commonly called the "oligarchs' union," was vague on how big business might make a contribution to Putin's call for a war on poverty in Russia.

But he referred to increasing taxes "on goods with a high profit yield" -- an apparent reference to the energy sector -- and a redistribution of wealth through charity. He said it could be up to the government to decide which sectors to target.

FEARS FOR PRIVATIZATION DEALS

The July 2 detention of YUKOS shareholder Platon Lebedev on charges linked to a 1994 privatization deal has sparked fears among investors that authorities might re-examine the deals struck during the mass sell-off of state property in the 1990s.

Fortunes were made overnight by a handful of entrepreneurs who snapped up state assets, often at bargain prices.

Many analysts see the affair as an assault on YUKOS boss Mikhail Khodorkovsky, Russia's richest man, for backing opponents of pro-Putin groups in this December's parliamentary elections.

Some analysts see the affair as a power struggle between Kremlin officials close to ex-president Boris Yeltsin and those appointed by Putin, who have links to the security forces.

But a senior Russian official sought to reassure investors, insisting that authorities would not unravel the privatisation process that revolutionized the post-Soviet economy, though many deals had taken place in murky circumstances.

"The position of the President is that privatisation will not be revised," said the official, who spoke to foreign journalists late Tuesday on condition of anonymity.

The official conceded the affair was hurting Russia's image and the climate for foreign investment but said the problem was a tough one to resolve.

The official would not be drawn into supporting theories of Kremlin foul play. He said Putin had no prior knowledge of impending police action but was in no position to impede an investigation by the prosecutor-general's office.

"The president and the leadership find themselves in a difficult situation," he said.

Pressed for an explanation of who was behind the police move on Lebedev and YUKOS, the official suggested it may have followed a tip-off to prosecutors by YUKOS' competitors.