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Wednesday, February 07, 2007

Oligarchs Placed an Equal Distance from Power

Russian OligarchsFeb. 07, 2007 - Kommersant - by Andrey Kolesnikov - Russian President Vladimir Putin met with members of the Russian Union of Industrialists and Entrepreneurs. Kommersant special correspondent Andrey Kolesnikov thinks that the president forgave them for all that they did for themselves, and for him and for the people of the country. The president's meeting with the businessmen took place in Katherine's Hall again this years, after being held in the add-on 14th Building for the Kremlin for several years. That annoying relocation took place after a lively conversation took place between the president and YUKOS head Mikhail Khodorkovsky in Katherine's Hall in 2002. At the last meeting, the RUIE members were diluted among members of the less august professional groups OPOR and Business Russia. The topics under discussion were chosen to show business its place (as was last year's meeting, devoted to “the social responsibility of business before society”). That was not difficult. The businessmen have been selfless for several years in a row now and are getting more selfless every year. The list of those present was impressive. The presidential administration was well represented. Chief of the presidential executive staff Sergey Sobyanin sat to the president's left, and deputy chief of the presidential executive staff Vladislav Surkov and presidential assistant Igor Shuvalov sat on his right. It had been announced that head of the president's expert department Arkady Dvorkovich would be present, but he was not in evidence. Beyond the members of the presidential staff sat Minister of Economic Development and Trade German Gref, Finance Minister Alexey Kudrin and Natural resources Minister Yury Trutnev. There was a space between the ministers and the businessmen, who sat beyond them. First Putin congratulated RUIE on its 15th anniversary. Then he continued, “We must take qualitative steps to change from simply exploiting natural resources to fully processing these resources... We are talking about increasing the processing of raw materials and developing high-value added industries... Russia is the world's biggest producer of gas and can potentially become the world's largest producer of oil. Truth to tell, I am not sure whether we need this but Russia and our companies certainly have this opportunity.” It was already clear that this year's meeting would be more serious than the last one. “We need significantly to increase the share of high value-added processing industries,” he said. “We need to learn not only how to profitably export crude oil, gas, ore minerals and wood, we also need to process natural resources within Russia and to produce full-value high-tech products for foreign markets.” The president was clearly diverging from his written text and seemed highly involved in what he was saying. “We need new processing companies in petrochemistry, the wood industry, and in the coal and mining industries,” he said. “I think that our production companies are directly interested in this. As such they can make their business more stable even if at a given time it simply seems more favorable to sell raw materials in view of today's market conditions.” Putin's wishes for business are partially an ultimatum, if only because that is they way the businessmen take them. He probably understood too that he had to offer something in return for huge investments in processing plants. He thanked them in advance and told them that the state was fulfilling their request to improve the quality of technical education. Then RUIE chairman Alexander Shokhin spoke. He told the president in detail why it is simpler for business. State protectionism an obstacle in other countries, and the lack of it in Russia is as well. Furthermore, Shokhin said that “the greater the degree of processing, the more problems there will be with VAT refunds, because every new degree will require a new refund. That is not profitable for companies because most refunds are obtained through the court. The RUIE will not demand a reduction of the VAT to 13 percent, Alexey Leonidovich [Kudrin], as was proposed to us two years ago, but to 10 percent.” Such active lobbying right in Katherine's Hall had to be respected, although Kudrin did not give the impression of being particularly concerned by it. “Therefore, it would be good to show some improvement in the administration of VAT refunding in the near future,” Shokhin concluded before moving on to demanding more tax holidays for enterprises as they are being set up and that import duties be cancelled on equipment that Russia does not produce. “At previous meetings, we spoke about forming an agreement on the right to the land under enterprises and no one was against it, but no law has been sent to you for signing yet,” the RUIE head continued. “Nor is it being prepared. Now the law has to be introduced later than planned so that future owners will have time to dispute in court incorrect estimates of the values of their land that municipal organizations will try to dictate to them.” Putin listened carefully to Shokhin, taking notes from time to time. Minister of Industry and Energy Viktor Khristenko took very full notes and Gref did not take any. Shokhin was followed by LUKOIL head Vagit Alekperov. He was concerned about European standards. “It will take 30 billion to convert to the Euro 5 standard by 2015,” he said, without specifying whether he was talking about dollars or euros. Evraz Group head Alexander Abramov proposed that the government set the fees for state services several years in advance, since the investment cycle in big business is lengthy. He urges the state monopolies to follow the example of Gazprom, which has set its prices through 2011. When the president asked him for more detail, it became clear that he was interested in the prices of rail transit. “We are on the way to founding transatlantic companies!” chairman of the board of SUAL Viktor Vekselberg stated. He spoke of the country's need for “global rebranding.” The president interrupted him to suggest, “Let's give up the usual terminology. Conquer' a market, expansion' – our colleagues are afraid already, even though it's not clear what they are afraid of… Some sort of incomprehensible fear comes over our foreign partners and the issue of Russian business developing foreign markets becomes very politicized. They have compelling motivation to come to work here – reducing production costs.” The meeting ended abruptly when the president announced that it was time for him to visit Mstislav Rostropovich in the hospital. He promised to say hello to him from the businessmen.

Washington Protests New Yukos Charges

open gallery...

U.S. Congressman Tom Lantos (D-CA) (left) speaks to the media after the trial of Russian oil magnate Mikhail Khodorkovsky in Moscow on May 31, 2005. Khodorkovsky was sentenced to nine years in a prison camp after being found guilty in a tax evasion trial widely seen as orchestrated by the Kremlin to crush a political rival. "This political trial before a kangaroo court has come to a shameful conclusion," U.S. Democratic representative Lantos said outside the court.

Feb. 07, 2007 Kommersant - by Dmitry Sidorov, Gennady Sysoyev - The United States has recently had some sharp words for Russia regarding the new charges that have been filed against former Yukos executives Mikhail Khodorkovsky and Platon Lebedev. According to the US State Department, these actions "raise serious questions about the rule of law in Russia." Kommersant has also obtained a copy of a letter to the State Department from Congressman Tom Lantos, the chairman of the House Committee on Foreign Affairs, in which Mr. Lantos maintains that the Yukos executives have been imprisoned "for their political activities, which threatened Putin's totalitarian regime." Mr. Khodorkovsky's arrest in 2003 was followed by demands in the US to bar Russia from the G8 group of leading industrialized nations. This time around, the US government might just let the ball roll in that direction. At a briefing in Washington on Monday evening, State Department spokesman Sean McCormack said, "the continued prosecution of Mikhail Khodorkovsky and the dismantlement of Yukos raise serious questions about the rule of law in Russia." Though Mr. McCormack was responding to a question from a journalist at the briefing, he read from a pre-prepared statement. "Khodorkovsky and his associate, Platon Lebedev, would have been eligible to apply for parole this year, having served half of their terms. These new charges would likely preclude their early release," said Mr. McCormack, adding that "many of the actions in the case against Khodorkovsky and Yukos have raised serious concerns about the independence of courts, sanctity of contracts and property rights, and the lack of a predictable tax regime" in Russia. Mr. McCormack's conclusions were unwelcome for Russia: after noting that "the conduct of Russian authorities in the Khodorkovsky Yukos affair has eroded Russia's reputation and confidence in Russian legal and judicial institutions," he went on to warn that Washington will not shy away from expressing its concern over Moscow's behavior "at an appropriate time and at the appropriate level." Kommersant has also learned that Representative Tom Lantos (D-CA), the chairman of the House Committee on Foreign Affairs, sent a critical letter that same day to Barry Lowenkron, the assistant secretary of state for democracy, human rights, and labor, who is responsible for preparing the State Department's annual report on the situation of human rights in different countries (the report for 2006 will be issued in March). In his letter, of which Kommersant has obtained a copy, Mr. Lantos requests that Mr. Lowenkron include the phrase "Khodorkovsky and Lebedev are political prisoners" in the section of the report that deals with Russia. He also insists that the former Yukos executives "are imprisoned not for any crime that they committed but for their political activities, which threatened Putin's totalitarian regime." Washington's reaction to the new charges filed against the former heads of Yukos is much stronger than the State Department's response immediately after the arrest of Mikhail Khodorkovsky in October 2003. Then, a spokesman said only that "the actions taken against Mr. Khodorkovsky testify to the selective nature of justice in Russia." The torch of indignation was taken up only a month after Mr. Khodorkovsky's arrest by the US Congress, where Senators Joe Lieberman and John McCain co-sponsored a resolution with Representative Lantos demanding that the president exclude Russia from the Group of 8. Russia has been a member of the group since 1997. The initiative failed to gain sufficient support from either congressional leaders or the White House, however, and in December 2003 the Senate passed a watered-down resolution calling on "the law enforcement and judicial authorities of the Russian Federation [to] ensure that Mikhail B. Khodorkovsky is accorded the full measure of his rights under the Russian Constitution to defend himself against any and all charges that may be brought against him, in a fair and transparent process, so that individual justice may be done, but also so that the efforts the Russian Federation has been making to reform its system of justice may be seen to be moving forward." Additionally, in March 2004 the Senate Foreign Affairs Committee adopted a resolution that called for Russia to be barred from continued membership in the Group of 8. The president, however, chose to ignore the resolution. As a spokesman for the State Department told Kommersant then, "congressman are always coming up with some kind of resolution - that's their job." Today the situation is a little bit different. Since November of last year, the US Congress has been in the hands of the Democrats, who traditionally take a harder line in relation to rights and freedoms in Russia. Thus, the chances are significantly greater now that a resolution similar to that proposed in 2003 will reappear on the congressional agenda. Relations between the White House and the Kremlin are also more critical than they were three years ago. As State Department spokesman Sean McCormack pointed out, "such actions as this and other cases raise questions about Russia's commitment to the responsibilities which all democratic, free-market economies countries embrace." The mood in Washington was indirectly confirmed for Kommersant by Terry Davidson, the chief of the State Department's European division press service, who said in a conversation with our correspondent that assistant secretary of state for European affairs Dan Fried has said numerous times that the US will no hesitate to let Russia know about any concerns that might arise. A source close to the White House, who spoke on condition of anonymity, expressed Washington's concerns more openly: "the 2008 presidential elections in Russia mean that the Kremlin has to keep Khodorkovsky and Lebedev in jail and to not let them have any chance of early release." The press office of the Russian Foreign Affairs Ministry said that there is so far no official reaction to the US State Department's statement. "We will need to see what this turns into," said a senior Russian diplomat. "But in principle we're starting from the point that everything we're doing is by the books."

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