HOW HE SEES IT Putin's stealing raises concerns
By PETER A. BROWN
Communism's fall in Russia and China improved world stability because nations whose economies depend on foreign investment limit their political and military adventurism.
That is why the de-facto renationalization of part of the Russian oil industry through the forced sale of Yukos, that nation's largest private oil firm, at a bargain price to the Kremlin is such an ominous development.
Russian President Vladimir Putin is signaling that an internal power grab is more important than scaring away billions of dollars in Western investment needed to rebuild his economy. Either that, or he has concluded his energy resources are so valuable that investors won't bolt even at the risk he will eventually seize all or part of their enterprise.
This has little to do with ideology. Brazilian President Luiz Inacio Lula da Silva, who was elected as a leftist, has been unwilling to do anything to turn off investors.
Terrorism certainly should remain the top U.S. concern, but the Yukos developments require Americans to reassess any previous belief that Putin just wants to put a chicken in every Russian pot.
In other words, it's naive to assume that his highest priority is improving the Russian standard of living, as was the case with leaders there immediately after the Soviet Union imploded.
Whether re-establishing the Soviet "leader for life" tradition remains Putin's goal, or whether he also has some of the same expansionist desires of his predecessors, remains unclear.
Yet, when combined with other steps to centralize political power and rebuild the military, the bizarre apparent poisoning of the presidential candidate he opposed in neighboring Ukraine, Yukos' sham "sale" is more than worrisome.
Until now, all Putin has done is grab political power. Stealing private money, which is in effect what has happened, gets investors' attention real quick.
Russia has the globe's second-largest oil reserves. The government's Yukos takeover, combined with its existing holdings, now not only puts oil and natural gas in control of a politician rather than market forces, but almost certainly means that output will fall.
History teaches that putting any economic activity under state auspices reduces productivity, which is not good for consumers, or the world economy.
But, perhaps more important than what he did, is how Putin pulled this off and what it says about his mind-set.
Beginning in 2003, when the Russian government arrested Yukos' chief executive for tax evasion, Putin has sought to reassert state control. He wants to regain some assets the government sold off a decade ago -- too cheaply, he believes -- to private investors after communism's fall.
Yukos was forced to auction off its assets at a bargain price to a company fronting for his government in order to pay what appears to be an outrageously high $27 billion tax bill.
By doing so, Putin is sending a clear signal to the international community:
This Russian government is not so eager to attract investment, as appeared to be the case when the Soviet Union collapsed, that it will adopt capitalism's political comrade in the West -- political democracy.
Democracy is not just free elections, but also the rule of law that is the required precursor for people to invest their money. Investing in a country without clear rules and governments that enforce them is a very risky enterprise.
Wild West investing
Bob Strauss, the former chairman of the Democratic National Committee who became the first President Bush's ambassador to Moscow during the early days of the Soviet implosion, underscored the Wild West nature of investing in Russia despite the vast opportunities there.
If a young investor had $100,000, Strauss told reporters in 1991, he should invest it in Russia. But if that same investor had $10 million, he should also invest $100,000 because of the unknowns inherent in the transformation taking place.
Since then, the belief has been that Russia was slowly, but surely, moving toward a European-style democracy with socialist political leanings and a quasi-capitalist economy.
While that may still be the case, it is instructive to compare the Soviet experience with China, where economics now seem to outrank politics.
X Peter A. Brown is an editorial page columnist for the Orlando Sentinel. Distributed by Knight Ridder/Tribune Information Services.