Medvedev Sticks Up For Private Business

In a second attempt this week to calm investors worried about the Mechel affair, President Dmitry Medvedev on Thursday called on authorities to stop harassing businesses and private companies to start paying taxes in full.

"One is fed up with all sorts of checks and harassment initiated on the basis of commercial interest," Medvedev said, speaking exactly a week after Prime Minister Vladimir Putin publicly called for an investigation into coal and steel giant Mechel for possible price-fixing.

"In general, law enforcement agencies and authorities must stop making life a nightmare for businesses," Medvedev told a meeting of top officials in the Smolensk region, Interfax reported.

The meeting's official agenda was facilitating the development of small and medium-size businesses, but Medvedev's stern statement was a clear attempt to calm the jittery business community. Medvedev on Tuesday also sought to reassure investors by describing the Russian stock market as one of the most attractive in the world. He did not specifically mention Mechel by name on Tuesday or Thursday.

Putin launched a verbal offensive against Mechel on July 24, accusing it of illegal transfer pricing to decrease tax payments and asking the Investigative Committee at the Prosecutor General's Office and Federal Anti-Monopoly Service to investigate the company's finances. He reiterated his call Monday, causing Mechel to lose about half of its value even though the publicly traded company was quick to promise to cooperate with the authorities. Both the Federal Anti-Monopoly Service and Investigative Committee heeded Putin's call, even though the latter answers to the president rather than prime minister. Two more agencies have also announced that they would investigate Mechel.

Speculation is rife that Mechel's competitors could benefit from the offensive, which could weaken the company and make it vulnerable to a takeover.

Medvedev's comments Thursday could be interpreted to mean he did not agree with Putin's actions, but a spokesman for Putin denied any rift in their vision of relations between the authorities and business.

"Both Putin and Medvedev give their paramount attention to officials' despotism, corruption, the investment climate in the country and the problems that businesses face, and there are no disagreements between them," spokesman Dmitry Peskov said by telephone.

Medvedev and Putin met Wednesday to discuss social and economic policies, he added.

Medvedev was probably trying to reassure investors rather than publicly rebuff Putin over Mechel, said Alfa Bank's chief economist, Natalia Orlova. "This is an attempt to calm the market after the Mechel fever," she said.

While calling for an end to the harassment of businesses, Medvedev on Thursday urged companies to pay their taxes. "Businesses should also act responsibly and pay taxes," he said. "Of course no one likes paying taxes and everyone is trying to find ways to optimize payments, but it is unacceptable when the optimization results in tax responsibilities being decreased by four or five times as they do here."

In detailing his accusations against Mechel on Monday, Putin said the company was selling its products to offshore companies it controlled at prices some four times lower than domestic prices.

In discussing the development of small and medium-size businesses, Medvedev on Thursday threatened federal and regional authorities with "proletarian justice" if they continued to avoid granting long-term leases of offices and facilities to the private sector.

Putin made no public comment about Medvedev's remarks Thursday. But he did move to circumvent Medvedev by asking the Emergency Situations Ministry and Foreign Ministry, which both answer directly to Medvedev, to render assistance to Ukraine and Moldova, which have been stricken by floods.

Meanwhile, 80 percent of Russians believe Medvedev is following the course set by Putin, according to a survey released Thursday by the independent Levada Center.