Kotlas Pulp and Paper Mill to be Nationalized? - 19 December, 2002

Does the government know what to do with oligarchs if they work badly?
How long shall we observe grouping of Russian oligarchs around enterprises of the timber industry? Or enterprises of other spheres? The country has already got tired of different quarrels and disputes of oligarchs. Majority of these oligarchs obtained much property for little money when privatization was started in Russia. They should be thankful to generous and slowwitted Russia for the provided opportunity to become richer. That is why oligarchs must work in a proper way. But if they don’t produce competitive goods, don’t provide good conditions for their workers and don’t pay taxes duly, they must return the enterprises back to the state. The government must find better candidates for management of these enterprises. These may be even Chinese; the basic requirement is that they must work honestly.

Let's take the Kotlas Pulp and Paper Mill for example. How long will this scandal at the enterprise last? State authorities must come to the enterprise and establish the actual state of things; if these facts are confirmed, armed special police units must come to the enterprise and drive everyone out of there.

The Moscow Arbitration Court pronounced a judgement that companies Continental Management, Bazovy Element (Basic Element) and the “St.Petersburg” Banking House had illegally purchased shares of the Kotlas Pulp and Paper Mill. Very good. Russians hold decisions of the court sacred. And those who feel offended can challenge this decision legally.  

Former staffer of Siberian Element (which is currently called Basic Element), currently deputy chairman of the Federation Council committee for industrial policy, German Tkachenko calls for another auditing of the Kotlas Pulp and Paper Mill. He alleges that Ilim Pulp (the owner of the Kotlas enterprise) doesn’t realize the approved investment program. In fact, it won’t realize the program until its activity is screened by rather influential state officials. 

The official website of the RF Accounts Chamber provides an official report of the Chamber’s auditor Vladislav Ignatov done in accordance with a deputy inquiry. The report says that the Accounts Chamber lays serious claims to Ilim Pulp Enterprise concerning privatization of the Kotlas Pulp and Paper Mill. And not only. Is an official conclusion of the governmental inspection authority not enough? And it is not connected with the estimate of activity of the Russian Federal Property Foundation and claims of Continental Management. For instance, why doesn’t the Russian Prosecutor’s Office  investigate violations made during privatization of the enterprise? When it was discovered that Interros committed mistakes during privatization of Norilsk Nickel, it was deprived of the shares it got after the privatization. And in this situation nothing serious is done with respect to the violators at all.

An investigation must be started; and even before official results of the investigation are published, the enterprise must be returned to the governmental ownership. It might happen that the state management would be a success and arrange affairs at the enterprise properly. 
It was already in 1999 that the RF Accounts Chamber verified the course of privatization of the Kotlas Pulp and Paper Mill and discovered several mistakes committed by the Ilim Pulp Enterprise corporation. But only this year a group of Swiss privatization specialists issued a judicial estimate concerning these mistakes.

State Duma deputy Sergey Kolesnikov investigated privatization activity of Ilim Pulp in the Irkutsk region. He found out that when Ilim Pulp privatized Bratskkomplexholding, it performed a concentrated withdrawal of the enterprise’s assets, which brought the enterprise to “an artificial” bankruptcy. Enormous debts of the enterprise to the power engineering sphere and to the budgets of different levels were under the menace of a default. And the Accounts Chamber confirmed the results of the deputy investigation completely. Did anything change in this situation after all? Nothing.

Do these methods differ from the methods recently employed by Basic Element? They don’t. They only were employed in a different period of time and under a different political support. To tell the truth, these methods were widely used during privatization all about Russia under the guidance of chief reformer Anatoly Chubais and with political support of the first Russian President Boris Yeltsin. The latter never seriously went deeper into details of economic processes. This is the reason why Russian oligarchs get so much nervous when it is declared that results of the privatization in Russia are highly likely to be reconsidered.

The new Russian government guarantees a quiet life and confidence in the future to the new ruling class. Why doesn’t the ruling elite pays back to the government? If the oligarchs are allowed to live quietly, they must settle their disputes and scandals in a proper manner, in accordance with the Russian regulations and laws; they must make their policy predictable and be ready to give up their personal ambitions for the sake of the governmental or the national interests.

Liberal critics of the incumbent President Vladimir Putin urge us to open the eyes and see who is actually ruling the country and who manipulates the president. But we understand perfectly well that not a single authority in the world can rule the country without support of the oligarch capital. But Russia isn’t like the rest of the world. Our traditions are rather similar to China’s, not to European and American.

Kira Poznakhirko

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Author`s name Michael Simpson