Thursday, August 27, 2015

Putin Economy, Based on Theft, Can’t Survive Let Alone Develop, Bitkov Says

Paul Goble

            Staunton, August 27 – Vladimir Putin’s economy based on theft and the destruction of entrepreneurialism can’t survive let alone develop, according to Igor Bitkov, a Russian businessman from whom the Kremlin took his company and ran it into the ground while accusing him of running a scam and hounding him and his family into jail in Guatemala.

            In a commentary on Ekho Moskvy this week, Bitkov, currently behind bars in Guatemala on trumped up charges of passport fraud that Moscow appears to have encouraged, says that the inevitable collapse of Putin’s system reflects the impact on Russia as a whole of the means the Kremlin used to steal his business (

            After detailing the ways in which he and his wife built their paper industry between 1993 and 2008, Bitkov describes the classic “raider” actions of Kremlin-linked banks when he refused to pay bribes or enter into corrupt schemes to provide money in other ways to Putin and his people.

            “We preferred,” he writes, “to remain non-party entrepreneurs free from government obligations.”  But precisely because he and his wife were committed to that, “our business was taken away from us by the classical application of tested Putin methods” – getting the banks to call loans, using bankruptcy law to freeze assets, and then charging the victims with crimes.

            “Now, seven years after this happened,” Bitkov continues, “it is possible to sum up the results. Our factories are not functioning.” The banks involved are caught up in fights over the division of property. Much of the new equipment and all of the resources have been “stolen by the bankers themselves.”

            Bitkov and his wife have been found guilty without trial, and Moscow is seeking their extradition after they fled abroad when Putin moved against them. (On their travails there and Moscow’s failure to help, see “The Bitkov Case – a Dangerous Sign of the Times,”

            “In the course of seven years, no one has been concerned about restoring the work of the enterprises” that were taken from him, Bitkov says. “Reality turned out to be more horrific than my most pessimistic expectations. Putin’s oprichniki, having gained control over the factors, did not even support them at their previous level of operation.”

            Instead, the imprisoned Russian businessman says, “they preferred to steal all that they could … If we are scam artists, then why did we increase the income of the company by seven times over seven years,” while they, the supposed law-abiding people, have simply run it into the ground?

            Now, Bitkov says, “we can answer this question quite simply: The entire essence of Putin’s economic policy from the very beginning consists in theft. Businesses were taken from loyal oligarchs … Then came the turn of mid-level entrepreneurs including us.” And when the Kremlin ran out of disloyal people to steal from, it began to focus on loyal ones as well, people like Luzhkov, Baturin, Pugarchev, and Yevtushenkov.

            “I am certain,” he continues, that as a result, “the circle of loyalists will gradually shrink,” forcing the regime to look for ever more people to steal from until there are none left. As long as oil prices were high, this fundamental problem with the Putin regime was hidden from many; now it cannot be hidden from any.

            “The main investor of Putin’s Russia is the state and state companies, that is, the president himself,” Bitkov says. And that is why he invested mostly in “grandiose” projects that celebrate himself and his greatness rather than in those sectors which are productive and give promise of improving the country.

            All that ran out when oil prices crashed, and trying to find new money by taking it from education and health care, as Putin is doing, “will not boost the standard of living and will have just the same negative, long-term consequences as was the case in the USSR.”  Add to that “the isolation political and financial” caused by Putin’s aggression and Russia faces disaster.

            To distract attention, Putin is putting out the idea that import substitution will lead to economic rebirth; but “where will Putin actually be able to find domestic entrepreneurs who will risk carrying out new projects? Will he amnesty those [he’s put in prison or forced to emigrate]? Will he let them out of prison? Will he return them from abroad?”

            Putin isn’t going to do that: “he is a proud guy unaccustomed to give way before the slaves,” Bitkov says. Moreover, “the present-day business elite of his closest circle … have never tried to create a business operating on their own resources.” They haven’t had to and they can’t.

            All this is fated to end “sadly,” he says. “Having destroyed entrepreneurs like us,” Bitkov argues, “the Putin system has wiped out the class of entrepreneur workers, innovators, and investors. Young people now adapting to reality strive to fill the ranks of corrupt bureaucrats. No one wants to get involved in entrepreneurial activity.”

            And Bitkov concludes: “The Putin economy, constructed on thefts, extortions, and high oil prices is not capable not only of developing but even of surviving.”  And he adds that as the Bible points out, “’by their fruits you will know them.’”  The people living around the plants Putin has shuttered after stealing as much as he could already do.

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