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Roman's tainted gains
Financial Times ^ | August 22 2005

Posted on 08/22/2005 12:23:05 PM PDT by Tailgunner Joe

The proposed sale by Roman Abramovich, the Russian oligarch, of his estim-ated $10bn (£5.5bn) stake in the Sibneft oil company to Gazprom, the state-controlled gas group, looks like a neat way of settling accounts with his country.

He sails off into the sunset, free to buy yachts and football clubs, while the Kremlin virtually completes the renationalisation of Russia's core energy assets. Smiles all around, not least among the bankers involved.

The truth is far less pleasant, for Russia and for Mr Abramovich. This deal, if it goes ahead, will be the latest development in the untransparent privatisation of Russia's mineral wealth in the mid-1990s, of which Mr Abramovich was a principal beneficiary. After selling the Sibneft assets for a song under former president Boris Yeltsin, the Kremlin is buying them back for a fortune under president Vladimir Putin. The wheel has come full circle, leaving Mr Abramovich very rich and robbing Russia of money that might have financed schools and hospitals.

Strikingly, Mr Abramovich has avoided the fate of Mikhail Khodorkovsky, founder of the Yukos oil group, who has been jailed for fraud and had his assets confiscated. Both men made their fortunes in similarly opaque ways. Mr Khodorkovsky was punished because he dreamt of ruling Russia. Mr Abramovich has had the sense to respect the Kremlin.

There may be even more to it. Mr Khodorkovsky was always his own man. Mr Abramovich is close to former president Yeltsin and his family. Exporting the Sibneft billions could be the Yeltsin family's way of taking out insurance against political change, perhaps in the 2008 presidential poll, when Mr Putin must stand down.

The punishment of Mr Khodorkovsky now looks even more arbitrary than before. Mr Putin could have dealt with the underpriced privatisations by a one-off supertax applied equally to the main beneficiaries. In return, he could have offered a statute of limitations and left the original deals in place. The oligarchs would have grumbled but they would have paid up. There would have been a rough-and-ready equality before the law. The principle of property rights, the foundation of a good business climate, would have been established, however imperfectly.

Now, arbitrary rule has triumphed. The victors are the Kremlin bureaucrats who have established, with Mr Putin's support, that might is right. They have also made clear they want their share of the spoils, by taking top jobs in state-run industries.

However, the present Kremlin team have no guarantee the authoritarian power they have accumulated will remain in their hands. They worry about 2008. And they have nightmares about democratic revolts of the kind that swept Ukraine, however unlikely that may seem in Russia today. The forces released by communism's collapse have yet to play themselves out.


TOPICS: Business/Economy; Foreign Affairs; News/Current Events; Russia
KEYWORDS: abramovich; gazprom; mikhailkhodorkovsky; oil; oilcompanies; oligarchs; privatisation; privatization; romanabramovich; russia; sibneft; ukraine; yeltsin; yukos

1 posted on 08/22/2005 12:23:09 PM PDT by Tailgunner Joe
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To: Tailgunner Joe

Hrmm, good article.


2 posted on 08/22/2005 12:27:39 PM PDT by Alexander Rubin (Octavius - You make my heart glad building thus, as if Rome is to be eternal.)
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To: Tailgunner Joe

I don't blame Roman a bit. His choices seem to be a)Sell his oil enterprise or b)have it confiscated sometime in the near future. Pooty Poot is as red as they come. It won't be long before Russia goes back to bread lines and genocide.


3 posted on 08/22/2005 12:34:07 PM PDT by Jaysun (Democrats: We must become more effective at fooling people.)
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To: Jaysun

Russia is quickly losing its freedoms and Putin has been hard at work to wield the hammer and sickle in not so subtle ways.


4 posted on 08/22/2005 12:45:59 PM PDT by princess leah (\)
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To: princess leah
Russia is quickly losing its freedoms and Putin has been hard at work to wield the hammer and sickle in not so subtle ways.

I know. They were probably better off with the Slavic version of WC Fields. Putin is shrewd instead of drunk.
5 posted on 08/22/2005 1:12:09 PM PDT by Jaysun (Democrats: We must become more effective at fooling people.)
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