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World Bank Chief Expresses Confidence in Russian Reforms - 2004-01-21

The president of the World Bank told reporters in Moscow Wednesday that he has every confidence that President Vladimir Putin will press ahead with Russia's economic reform program, despite the recent concerns over the government's actions against Russia's largest oil company, Yukos.

The World Bank chief, James Wolfensohn says the next two years are extremely important for the future of Russia's economic reform program, and that the primary emphasis needs to be on implementation.

But with the Russian government showing no signs of a let-up in its actions against oil giant Yukos, Mr. Wolfensohn was asked how he could be so sure Russia would stay the reform course.

"The president assured me that there is no departure from the [World Bank] strategies and that this is the period of implementation," he said. "I was really very pleased to hear him say this, that any concern that some commentators have had that there may be a shift in thinking that he put to rest by an absolutely categorical statement that the die is cast in terms of the type of Russia he is seeking to lead, and that this next period is a period in which performance will be the criterion."

The concerns Mr. Wolfensohn refers to stem from last October's arrest and jailing of former Yukos oil executive Mikhail Khodorkovsky on multiple charges of tax evasion and fraud.

Mr. Wolfensohn said that after meeting President Putin, Prime Minister Mikhail Kasyanov and Finance Minister Alexei Kudrin, he was quite relaxed, as he put it, that the high-profile case will be resolved in what he called an open and transparent manner. But not everyone is so optimistic. The British-based Moody's Investors Service has placed the group's rating for Russia under review for a possible significant downgrade.

Moody's said in a statement that the review was triggered by the mounting pressure on Yukos and what it said was the growing likelihood of government-imposed fines.

Moody's also characterized the situation surrounding Yukos as increasingly grave.

As in past meetings in Moscow, Mr. Wolfensohn also cautioned Russia against what he called its vulnerability due to over dependence on oil exports.

He also encouraged the government to build up additional sources of income and jobs by supporting regional development within Russia and, in particular, sources of credit and finance for small and medium-sized enterprises.

The World Bank chief says Russia's leaders also need to simplify administrative procedures to grow existing businesses, as well as to encourage the creation of new enterprises in Russia.

Mr. Wolfensohn said he and President Putin also had a chance to discuss debt relief for Iraq during their talks.

"I regard Russia as one of the leaders actually in terms of debt relief, and I saw no signs yesterday of any great tension," he said. "I think it's business as usual, and I think this country adopts a very pragmatic and a very constructive approach, without being silly in terms of giving up on claims which should be met."

President Putin has been pushing hard to see that Russia is compensated for agreeing to write off Iraq's debt, asking for the honoring of lucrative Russian oil contracts signed during Saddam Hussein's rule as Iraq's president.