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Privatization Process to Remain Unchanged, says Russian PM - 2003-07-17

Russian Prime Minister Mikhail Kasyanov says the privatization of Russia's state-owned assets will not be reversed. There is growing business concern over recent government actions against a Russian oil giant.

Prime Minister Kasyanov told cabinet members that Russia's privatization process would remain unchanged. We believe and have always believed, the prime minister said, that the results of the previous years' privatizations are irreversible.

Recent government action against the Yukos oil company, one of the nation's leading oil producers, has alarmed business leaders and investors and raised fears that a re-examination of the state sell-off of property is inevitable.

In the past two weeks, government investigators, wearing masks, have carried out a lengthy investigation of the Yukos archives and a major shareholder in the company has been arrested on charges of defrauding the state.

The chief executive of Yukos, Mikhail Khodorkovsky, has also been summoned for questioning. Returning to Russia Wednesday from a business trip to the United States, Mr. Khodorkovsky dismissed the case against Yukos as politically motivated.

In an interview with Russian radio, Mr. Khodorkovsky warned that the recent actions against Yukos could unleash a new wave of capital flight from Russia. He said no matter how hard Russian business leaders might work to convince investors in the West that the current situation in Russia is only temporary, he predicted many business deals will be postponed or put off altogether due to the insecurity.

Mr. Khodorkovsky urged Russia's business leaders to do all they can to ensure the privatization program is not reversed and that the investment climate in Russia is not ruined.

Russian stocks continued their downward slide, one day after the market saw its heaviest losses since the financial collapse of 1998, with shares plunging more than five-percent. Shares in Yukos lost 10 percent of their value.

Roland Nash, a financial strategist with Renaissance Capital in Moscow, told VOA he fears more bad news ahead, despite the prime minister's remarks about privatization.

"The very fact that the prime minister feels it necessary to get up and say that privatizations are irreversible gives you an idea of how much fear there is currently in the market," he said. "And I would imagine we have not seen the worst of this yet. I would imagine that the market will continue to sell-off."

Many analysts believe the action against Yukos is part of a power struggle to limit the growing political influence of Mr. Khodorkovsky. He is Russia's richest man and has publicly backed the liberal opposition to President Vladimir Putin's government.

Analysts and business leaders have expressed dismay that President Putin has chosen to remain silent on the subject. They say that could raise further doubt about Russia's investment climate and prompt foreign investors to avoid Russia until the issue is resolved.