The State Hasn't Become Any Stronger By De-politicizing the Oligarchs

A report from the National Strategy Council last year is widely viewed as having foreshadowed the attack on YUKOS. Now the National Strategy Council is releasing a new report, with a focus on relations between business and government.

A report entitled "The State and the Oligarchy," which the National Strategy Council (NSC) headed by Stanislav Belkovsky prepared in May 2003, seemed to become one of the most notorious documents of the year. It added a new term - "oligarchic coup" - to the vocabulary of the political beau monde; and it named YUKOS President Mikhail Khodorkovsky as the chief ideologue behind this coup. After Khodorkovsky's arrest, precisely a year ago, the elite started wondering whether the report just happened to coincide with the Kremlin's moods, or whether it actually provoked the regime to take extreme measures against Khodorkovsky and his oil company.

The NSC is about to release a new report, and we have obtained a copy of it.

The major conclusion of the document composed in the "post-YUKOS" period is sensational: the state has indeed escaped the "oligarchic threat." Had this been done properly, Khodorkovsky would have been at large now.

Two sharp changes are evident after the first perusal of the document entitled Economy of Russia: the State and the Business: in the style and the subject of survey. As for the style, it is not that "shocking," but the tone is totally different: "The victory over oligarchs is unleashing the hands for bureaucratic autocracy," the authors immediately baffle the reader, though they previously proposed that big business should be eliminated as soon as possible. Given below are other distinctions of their standing: "legitimizing big business," "recognizing the rights of existing owners," "renouncing the bankruptcy of large companies," "conducting independent appraisal of the sold assets."

Let's cite an excerpt from the last year's document: "Since, in opinion of the ruling elite, the institution of presidency has accomplished its historic mission and is therefore redundant anymore (in the future it is more likely to be dangerous due to extensively broad formal powers of the president, which potentially enable him to change the basic philosophy and techniques of government) and since as individuals the oligarchs have no public political resource to win in the direct nationwide election, the key subject of the ruling elite has decided to limit the presidential powers in Russia and have it transformed from a presidential republic into a presidential-parliamentary republic (the quasi-French pattern). President of YUKOS (YukosSibneft) oil company Mikhail Khodorkovsky acts as the ideologue of this transformation; other key figures of the pool of oligarchs (Roman Abramovich, Oleg Deripaska, Mikhail Fridman) are supporting him openly and implicitly." Disclosed then is the covert scheme, using which "Khodorkovsky and Co." intends to seize power in Russia. The Constitution must be amended first; this will be done by the controllable Duma, the majority in which will be given to the "oligarchic" proteges. This parliament will form the controllable government, which Mikhail Khodorkovsky will lead. This, in fact, will be followed by the "oligarchic coup."

At first glance authors of the report entitled Economy of Russia: the State and the Business could be suspected of their wish to evidently "repent" of making the first report an impulse for a broad state attack on YUKOS. However, Iosif Diskin, one of the authors of both reports, told us that this viewpoint is extremely erroneous: "In our first report we spoke about the oligarchs and the state; that to conduct a dialog with business the state needed to change the concept of conducing a dialog as such. What has actually happened? In our new report we say that the state broke political influence of oligarchs, but failed to implement the demands which are evidently required to raise its effectiveness."

In this sense, he says, the second report is not the continuation of the first by content, but also an analysis of the present situation. The new document says that a victory over oligarchs is an achievement. However, the state has not become the conceptual leader, it is not building up new ideas or conducting a vigorous policy. "The state administration has no strategy and goals, the institutions for state regulation of the economy are weak. Conceptual leadership of the state and targeted adjustment of the economy do not support suppression of political claims of the oligarchs. The business has responsible partners in the face of the state. Contradictions of the economic policy: a new economic and industrial policy inspired by the prime minister is being undermined by actions of the key ministries" - this is the verdict the experts announce on the current status of the state "which has defeated the oligarchs."

According to Diskin, the first report also contained demands that the state "be strengthened." It is just that... "nobody has seen that." "Nobody has seen our appeal that the content of the state must be changed in the fight against oligarchs. Everybody has only paid attention to the scandal. Conceptual alterations of the state are required and the new report is focused on what hasn't been done for that. The state has managed to deprive the oligarchs of their shadow political role, which we upheld. However, we warned: hopefully, the state avoids entering the path of ruining the large business. Unfortunately, the state has nothing to offer the business as far as the aspect of content is concerned, the political analyst concludes.

The practice of liberal reforms is among the causes of the state's weakness. By conducting them, in the majority of cases the state "self-eliminates," authors of the report say. As a result, this gives rise to the creation of the institution of "pseudo-fair tenders," arranged for the sake of "rewards." The reforms needs to be toughly administered by the state; otherwise such approaches as "the market determines everything" cause deceleration in the adjustment of the key economic problems. "Slow resolution of the problem of route selection for eastern and western oil pipelines, chaos in determining the structure of the aircraft industry and selection of promising samples of military and civil aircraft," the report says.

The document outlines a new threat: "pure monopolism," which substitutes oligarchy. The absence of political claims is the main distinction between the above two threats. "Pure monopolism is when a number of industries are in the power of a couple of companies. They hold absolute economic monopoly despite the absence of any political claims. Unfortunately, the state offers no response to that as yet," Diskin explains.

Finally, relations between business and government are a key topic of the report. In addition to proposing consideration of such a "pillar" as the "second-echelon business" (the enterprises which are in the second hundred in the rankings by the scale but are far ahead of the giants by the growth rates), in 18 months after publishing the first report the experts advance proposals concerning the large business. "Legitimizing the large capital: recognizing the rights of current owners, who 'gained' the assets under the legislation of those days; recognizing a considerable underestimation of the state appraisal of assets during the sales of 1993-1997; conducting independent appraisal of the value of assets sold, audit and tax examinations, which finish the transition period; renouncing bankruptcy of large enterprises, giving them an opportunity to repay the surfacing "new" debts on agreement with tax bodies" - this is the proposed recipe for the irrevocable legalization of the Russian large business.

Besides, it is important to pass a political decision and assess the real contribution of the large business into the Russian economy, Diskin adds. He is evidently hinting at "pardon" for large businessmen, who had made up their fortunes in the 1990s.

At any rate, according to experts should the state applied the measures offered before Khodorkovsky was arrested, YUKOS president would have been at large now. We supported giving the chance to ransom the company and pay the taxes. This has nothing to do with the struggle against shadow policy of oligarchs. And, after Khodorkovsky would have denied any political claims, it would have been proper to leave him at large by applying the pre-trial settlement in all lawsuits," Iosif Diskin says. This must be applied to all large companies without exception, authors of the report conclude.

The last theses of the document contain advise for the regime. "Steady, impartial, trusted institutes I an indispensable condition for healthy economy... Passing "correct" laws alone won't be sufficient here. Required is the intelligent analysis of real (formal and especially informal) institutional regulators, an active search for ways of strengthening the institutional environment. Alliance of the state, the judicial power and civil society in the struggle for fair and independent court is the first step." An answer is available for question on how the state, which is weakened now, be made strong: "Renovated state:" understanding of the mission, acquisition of leadership, a strategic alliance with nationally and socially responsible business; renovation of the state's economic role is an indispensable condition for raising the speed and quality of growth. Responsibility of the state under the constitution requires conceptual leadership in forming the economic policy. The mission of the modern state is to encourage a broad nationwide dialog regarding the targets, tasks and priorities in the economic development, responsibility for implementation of its results... An alliance with responsible Russian business, based on the community of their targets, aspirations for mighty and just fair Russia, is a part of the state's revised role."

(From Putin.ru, 27.10.2004)