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Voloshin: Between Mea Culpa and Get a Good Lawyer

During a press conference held Tuesday this week in Baku, Head of the Kremlin's Presidential Administration Alexander Voloshin spoke in public for the first time at length since the advent of the "Yukos-Kremlin" conflict
Voloshin indirectly spoke about the conflict in July when referring to the prosecutor offices' heavy-handed treatment of Platon Lebedev, the arrested Yuko-Menatep official charged at first with defrauding the state, later with gross tax evasion. Voloshin's Baku comments addressed the most serious issue highlighted by the scandal ­ namely, the meaningfulness (or absence) of property rights stemming from the 1990s privatizations during the Yeltsin years. The significances of his comments warrant citation in full:

"There has been no revision of the results of privatization. There are simply some concrete cases that are being investigated. Our political position is that the results of privatization will not be revised. But putting this position into practice is a tricky matter ­ both politically and legally. Privatization processes never go smoothly.

The legislation governing our privatization process was incomplete and flawed, so anyone wishing to find fault with any privatization deal can easily do so. But there are cases that involved blatant violations, and in such cases it is tricky for the state to apply the principle of "no revision of privatization". For if the law enforcement agencies uncover legal violations, one cannot just say: "you must not reopen privatization deals, close the Criminal Code and go home."

In Russia, we need to leave quietly behind us the period of initial capital accumulation without undermining the foundations of our economy. This is a difficult issue. I hope that we will resolve it ­ in the sense both that the law will be upheld and that it will not be necessary to revise the results of privatization.”

It is quite obvious that Voloshin meant his remarks to be vague and open to interpretation. He comments make a number of (ambiguous) distinctions. First, a privatization amnesty is not possible, the issue is too politically charged. A de jure amnesty would give non-Kremlin controlled political parties an election issue that might pay handsome dividends during the December Duma elections. But, at the same time, flaws can easily be found in all privatizations while some specific privatizations warrant investigation if "blatant violations" can be found. Significantly, Voloshin did not define what the difference between an "incomplete and flawed" privatization and privatizations where "blatant violations" might be found. To date, that is being left up to those who attacked Yukos, Lebedev and Khordorkovsky.

Second, Voloshin appears to be appealing to reason, or at least reason, as he understands it. The reference to "initial capital accumulation" is very telling of his interpretation of economic development and social development during the Yeltsin years. Indeed he is correct, the 1990s was a period of "capital accumulation", but then again "capital accumulation", as a concept if not backed up by the rule of law, makes a distinction between “"ncomplete and flaw" and "blatant violations" a non-starter when it comes to generation of wealth. 

Third, Voloshin, if indirectly, suggested that further privatization investigations are a real possibility. Did he make these statements in Baku to brace the investment community (and Russia's electorate?) that what started with Yukos could happen yet again? This is unclear, but reading between the lines it would seem very likely.  The simplest interpretation of his comments is: there are problems with the law; we should get use to these problems for the time being.

One has to wonder if Voloshin was apologizing for the 1990s while in Baku. Who is was apologizing to?  Clearly, he seeks to underplay the issue of past privatizations that could play a role in the upcoming elections. He is also most likely sensitive to Putin’s desire to have Russia seen stable in the eyes of the international community, as well as foreign investors. His mea culpa would seem not to go far enough to satisfy either group.

Voloshin's press conference is interesting, if not disappointing, in another way. Voloshin only admitted the obvious. The lack of known, agreed to, and enforceable private property rights are and will wreak havoc in Russia’s political sphere until state authorities are deemed legitimate powerbrokers. The lack of clarity concerning property rights gives the oligarchs every reason to peddle their influence among the state, regional, and local bureaucracies. For some members of the security forces, the vagueness of property right laws allow them to ignore the difference between "incomplete and flawed" and "blatant violations" of deals made during the last decade.  Both groups have every reason to ignore what is good for Russia’s economy and the average Russian out of self-interest. Both groups, unfortunately, are acting rationally under the circumstances.  

Voloshin showed weakness in Baku. He said nothing about what should be done to increase the meaningfulness of the law or how property rights should be changed or protected. Has the Yukos affair finally broken the back of the Kremlin’s cardinal of smoked-room intrigue? Who knows, but my sense is all he really wanted to say is that thing are not going to change fast and that having a good lawyer wouldn't be a bad idea.

This is not good news from the "great mediator" while attempting to balance the interests of state and the super-wealthy during an election year. If this is his best effort to explain and calm down the impact of the Yukos affair, it would seem he has little personal faith that he will be the Kremlin's chief of staff during Putin's second administration.

Peter Lavelle.