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Questioning Candor on Corruption

President Putin's meeting Wednesday night with business leaders from the RSPP to discuss the delicate issue of corruption proved an interesting spectacle. Putin wanted to discuss methods of battling corruption, as the presidential administration prepares its plan for the overhaul of the administrative machine and the civil service.

It's hard to deny that among those who were gathered in the Kremlin are men with rich experience in the art of graft and presumably, therefore, well qualified to advise the president on how to combat corruption. As Yukos CEO Mikhail Khodorkovsky put it: "You can say that it all started with us. Well, it started at some point and now it must be ended."

Take, for example, two of the three main speakers at the meeting, Khodorkovsky and Vladimir Potanin. Both were intimately involved in some of the most scandalous privatization deals of the 1990s, the loans-for-shares auctions in which Khodorkovsky seized control of Yukos and Potanin of Norilsk Nickel and Sidanco. UES CEO Anatoly Chubais (also present) presided over the loans-for-shares giveaway as first deputy prime minister. And so the list could go on.

Many of these business leaders clearly thrived in the lawless environment of the past decade, so are the concerns voiced about corrupt officials anything more than disingenuous cant? In some respects, the game has genuinely moved on, and now tycoons are focusing more of their energies on rule-of-law issues (and sprucing up their images) because they want to secure their ill-gotten gains. However, this does not exclude them from making a grab for more goodies by underhanded means. Last year's Slavneft saga, culminating in a farcical auction, provides a salutary reminder of this. And the upcoming restructuring of UES is already being billed as a re-run of the loans-for-shares auctions.

While the oligarchs' know-how may be of value, Putin would be well-advised to proceed by inviting SME representatives to the Kremlin to hear another side of the story.

Small businesses disproportionately bear the brunt of red tape and corrupt officialdom. For big business, corruption may be an irritation, but for SMEs it's a matter of life or death. Moreover, a recent study by CEFIR shows a correlation between regions with a high concentration of ownership and high barriers to entry for businesses, suggesting that big business actively conspires with regional authorities to limit unwelcome competition from below.

It is instructive to remember that even when the oligarchs take an indisputable position -- that corruption is bad -- they have their own interests at heart.

Some things never change.

(The Moscow Times 21.ii.03)

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