Alfa's Aven Criticizes Lack of Local Ethics

LONDON -- Alfa Bank president Pyotr Aven shocked foreign businessmen by talking openly at an investment conference on Russia about the hazards of investing in his home country.

Aven spoke of the so-called "soft rights" that allow bureaucrats to interpret the law as they see fit. The banker labeled this as a major source of government corruption.

He also blamed the mentality of the Russian people for many of the country's problems. Russians do not consider a contract to be a binding agreement and the country has no tradition of speaking the truth, he said.

Calling on Yukos president Mikhail Khodorkovsky to back him up, Aven painted a grim picture of the difficulties that Russia's tycoons have in holding on to the enormous wealth they have accumulated.

There is no concept of property in Russia, Aven said. "We have to guard our property, and we spend 50 percent of our efforts just to hold onto it."

Aven and Khodorkovsky were among the business figures that snapped up valuable state properties through the infamous "loans-for-shares" program f a series of rigged privatization auctions held from 1995 to 1996 that many criticized as being equivalent to giving away enterprises such as oil major Sibneft.

On Thursday in London, Aven said Russia's most pressing need was not tax reform, or a liberal economic program, rather it was a need for moral leadership.

President-elect Vladimir Putin should and does feel a sense of moral mission.

"This is more important than whether or not he has an economic program," Aven said.

Putin was the object of much praise throughout the conference.

On Wednesday, State Duma Deputy and former Prime Minister Viktor Chernomyrdin called him a continuing force for reform. On Thursday, Unified Energy Systems chief Anatoly Chubais called the nation's new leader "a normal and intelligent contemporary president."

Only Duma Deputy Boris Nemtsov dared to publicly criticize the president-elect, for not stopping Oleg Deripaska and Roman Abramovich from monopolizing Russia's aluminum industry.

Representatives of the tycoons said Monday they would be combining their holdings to create Russian Aluminum, an $8.5 billion behemoth that would control some 70 percent of the nation's aluminum industry.

Deripaska missed his scheduled appearance at the forum, depriving delegates of the chance to quiz him about the aluminum industry's future.

Chubais said the most complicated challenge facing Russia was to determine the role of government in all of the changes taking place.

The government needs to be consolidated to free it from the influence of certain groups, allowing it to perform its legal functions rather than attempting to control economic activity, he said.

Chubais warned of dangers in Russia's relationship with international financial organizations. Negotiations for Western loans should be conducted in a manner that wouldn't isolate Russia from the international financial community.

Nearly all of the forum's speakers emphasized the need for foreign investment and Western aid.

Khodorkovsky called the period following the March presidential elections a unique opportunity for the country and the economy. However, he warned that things could become significantly worse in 2000 for Russia's debt-ridden economy if that opportunity is missed.

"To avoid a crisis, we have to quickly develop a strategy and attract money," Khodorkovsky said.