Privatization Déjà Vu
Hello dear readers … my apologies for the relative absence recently – both RA and I have been wrapped up in a number of summer projects which deprived us of blogging time. Over the next few weeks we will probably be a little light before diving back in full swing. In the meantime, you may have noticed our new editor, Kristina, is holding down the fort.
In other, more interesting news, we have been closely following the endless of saga of Alexei Kudrin vs. the less wise bureaucrats in the Kremlin, and his proposal to cover upcoming budget gaps by selling off minority stakes in the country’s premier state-owned corporations. The return of the privatization theme should make for some interesting discussions, as for many left-leaning observers of Russia, the catastrophic process of the 1990s continues to roil the Russian polity and serve as the fundamental basis for democratic failings. Our friend Stephen F. Cohen, for example, argued in that recent SIPA journal that “The main obstacle to democratization in Russia is not–contrary to American political and media opinion–Vladimir Putin or the KGB, or any single leader or institution. It’s the way the nation’s most valuable state economic and financial assets were “privatized” between 1991 and 1996. The idea of state or commonly owned property was not just a communist idea; it was a Russian idea, with origins long before 1917.“
As you may gather, I think there are some grounds to contend with such a broad statement. However I do wonder what will be said in coming months about Kudrin’s plan as well as the possibility that it could be blocked, and the impact that this mini-reenactment of privatization might have on Russian democratization … although the entire discussion gives one a sense of déjà vu. Below, a bit from the Financial Times:
The key, as ever in Russia, will be execution. Future stake salesmust not be a repeat of the shady insider deals of the 1990s. Thereshould be no new generation of oligarchs, or inefficient state managersturned into owners. Auctions must be carried out in an open andtransparent manner by internationally recognised banks. Foreigninvestors should be free to participate in a non-discriminatory way.Even if the leadership is committed, Russia’s bureaucracy and vestedinterests are so entrenched that achieving these goals – within theplanned 2011-13 time frame – may yet prove impossible.
Handlingthe privatisations correctly is, moreover, only a start. Russia stillneeds to strengthen protection of property rights. Too many foreigngroups – from Shell and BP, to portfolio investors such as ProsperityCapital, engaged in a tussle over an aborted buy-out of a power companystake – have found Russia’s legal system inadequate or susceptible topressure. It is not enough simply to ensure foreign investors can buyassets. They must be sure they can hold on to them – or indeed disposeof them – in an unimpeded way.
