#11 - JRL 7271
Financial Times (UK)
July 30, 2003
LETTERS TO THE EDITOR: What oligarchs owe to Russia
From Ms F. Avondo.
Sir, Marshall Goldman ("Russia will pay twice for the fortunes of the oligarchs", July 26) correctly identifies the privatisation of Russia's state-owned industries during the mid-1990s as the defining moment of the country in its post-communist history. The recent events surrounding the arrest of Platon Lebedev are also attributed to the flawed manner in which the government's assets ended up in the hands of a few individuals.
However, Mr Goldman should also draw attention to the fact that it is three years since President Vladimir Putin reached agreement with the oligarchs whereby their past excesses would escape government scrutiny and, more importantly, avoid possible renationalisation, on condition that they concentrated exclusively on developing their businesses in Russia. The reversal of capital flight, as described by Mr Goldman, is seen as the fruit of this agreement.
Mikhail Khodorkovsky has openly supported the two leading opposition parties (Yabloko and the Communists) with a view to speeding up economic and political reforms thus leading to greater stability in order to provide a more effective operating environment for Yukos. This would clearly help the company create political capital for itself and increase its share value. While providing political parties with financial support is acceptable by western standards, the worry exists that votes could, and most probably would, be bought in Russia.
It is equally apparent that the Kremlin is concerned that businessmen acquire independent and real political power. The lack of response from Mr Putin might suggest that he is unable to assert himself within the factions that exist inside the Kremlin.
In terms of the $300m Mr Khodorkovsky paid for a company that, as of July 2, is worth $20bn, it should also be noted that this valuation is based on a share price of about $10. In 1998, the share price was as little as $0.15. Mr Khodorkovsky is responsible for increasing the value of the company, by fair means or foul, more than 60-fold in less than five years. The issue is not whether the $300m paid for an undervalued asset was theft or not, but rather the origin of the $300m a young man in his early 30s used to acquire the company.
Furthermore, Roman Abramovich's recent spending spree in the UK is not only a "mere trifle"; it is a flagrant dismissal of his responsibilities. His wealth was acquired in Russia, also through the privatisation process, and as long as he continues to reinvest that capital in the country, a Russian citizen will ultimately benefit from proceeds the average person also had a theoretical claim to. To have profited from the state's undervalued balance sheet, and then to move the funds abroad, is to add insult to injury.
F. Avondo, Moscow 107450, Russia
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