Bringing Charges Against Businessmen New Normal in Putin’s Russia, Kireyev Says

Paul Goble

            Staunton, June 10 – When the Putin regime arrested Mikhail Khodorkovsky and liquidated YUKOS, many viewed that as something “beyond the pale;” but in the years since, the Russian government’s harassment and arrest of businessmen and the destruction of their firms has come to be viewed as entirely normal, David Kireyev says.

            Russia has become “the leader in using force against business,” the commentator writes in Novaya gazeta. Many feel this trend represents a return to the 1990s “but instead of killers and raiders criminal prosecutions are being employed” (novayagazeta.ru/articles/2020/06/11/85802-osobo-tyazhkie-investitsii).

            This development “destroys to the roots the business climate in the country, trust and private initiative and also forms a negative image of the entrepreneur in society,” Kireyev says.  And it “makes the attraction of foreign investment practically impossible and stimulates the flight of capital abroad.”

            The driving forces behind this involve the distrust of the government in small and mid-sized businesses, the lack of control over the force structures, and the lack of independence of the courts and the consequent lack of defense of private property, the commentator continues.

            “Beginning with 2014, there has been a stable growth in the total number of people convicted of economic crimes, and in 2018, a record was set: Russian courts handed down sentences of this kind to 7700 people, 20 percent more than in 2017.” As a result, Kireyev says, Russia now finds itself in the top five countries in terms of repression of business.

            Businessmen can see this and they are not encouraged by it: According to a Platform-VTsIOM survey, 71 percent of them consider business conditions in Russia unfavorable, 55 percent say things have gotten worse in the last year, and 5 1 percent expect them to get even worse in the year ahead. The pandemic has only added to this pessimism.

            If one looks ahead, one can easily imagine that “the Russian market in the not so distant future will become like that of the last years of the USSR on steroids, when in each segment, there was a single monopoly player under the control of the state” and when businesses were driven underground or out of existence altogether.

            Vladimir Putin has set the scene for this by declaring as he did in March of this year that businessmen are “crooks by definition,” hardly the kind of attitude by the chief of state that will create favorable conditions for business development or the attraction of outside investment that might make that possible.

            “The arrests of businessmen and the growth in the number of economic crimes does not herald anything good,” Kireyev continues.  But the government feels it can do this with impunity because its major source of income is the export of raw materials, a sector already controlled by monopolies.

            As long as the regime can get sufficient rent in this way, the regime will have little incentive to change the situation because the current arrangements surprisingly will be stable for some time even if there is no defense for businessmen or investors. And that is likely to be true for at least several decades.

            Consequently, few Russian economists “expect any essential structural reforms in the next few years.” The raw materials export model will continue to dominate, even though that will mean for the economy as a whole, Russia will enter another period of “lengthy stagnation” and thus represent still more “’lost decades’” in the country’s development.