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Putin Failing To Stop 'Theft Of Russia'

(Washington, DC--October 12, 2000) Despite some welcome new rhetoric, Russian President Vladimir Putin has failed to address the underlying problem that most threatens his country's future: the absence of genuine property rights defensible in court.

Because Russian capitalists have "conditional possession" rather than real ownership, Vladimir Brovkin told an RFE/RL briefing today, they have little incentive to save and re-invest and many opportunities to steal from their own companies, defraud the state of tax revenues, and send the proceeds abroad.

Indeed, he said, this emerging system represents both a revival and an expansion of the one that existed in tsarist Russia. Before 1917, the tsarist regime had the power to seize the assets of anyone who challenged it and thus in its own way discouraged economic development as well.

Brovkin, who heads a research program on organized crime in Eurasia at American University's Center for the Study of Transnational Crime and Corruption, said that Russia and the other post-Soviet states have developed a unique economic-political system, one that combines features from the Soviet command economy of the past and of the free market.

On the one hand, Brovkin said, government officials in many of these countries retain sufficient powers to tell the nominal owners what they must produce, to whom they must sell it and how much they must charge -- all with the promise that the state will underwrite their losses.

On the other hand, the nominal owners -- precisely because they recognize that their holdings can be taken away at any time -- seek to sell off assets rather than develop them and to shift assets to offshore accounts.

Together, the officials and their cronies in the economy are stealing from the state and ultimately from their fellow citizens, a theft that in Russia has amounted to more than $15 billion every year since 1992.

That "theft of Russia," Brovkin said, is leading to the deindustrialization of the country and to the expansion of organized crime. Ultimately, unless this theft is stopped, he said, Russia's factories and other economic infrastructure will simply stop working. Unless laws are put in place and enforced, the vast amount of money involved will contribute to a further growth of organized crime.

Other post-Soviet countries suffer these same problems, Brovkin said, but he added that at least some of them, including Ukraine, by virtue of both their size and their interest in escaping from Moscow's orbit, may be more willing in the near term to take steps to avoid such a disaster.