Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Soros: Privatization Stained Chubais




CAMBRIDGE, Massachusetts -- Billionaire investor George Soros, considered the largest single private investor in Russia, has described First Deputy Prime Minister Anatoly Chubais as "tainted" by his handling of a corrupt privatization process.


Taking the podium Friday at the second annual U.S.-Russian investment symposium at Harvard University's John F. Kennedy School of Government, Soros told hundreds of attendees that Chubais had crossed a line in his dealings with Russia's financial oligarchy.


"Let's face it, he [Chubais] was tainted by the robber capitalists' arrangements," he said, adding that mass privatization led to the "looting of state assets" by a handful of powerful tycoons, a process he characterized as "frankly quite repulsive."


The financier gave his view on how privatization deteriorated into insider deals as Russian bankers sought recompense for aiding President Boris Yeltsin when he was struggling to win the 1996 presidential elections.


"It was a very successful operation, but it left behind a stain, which is attached to Chubais," Soros said, adding that it was the appointment of First Deputy Prime Minister Boris Nemtsov in March that "greatly influenced" his decision to move forward with investing in Russia.


Stepping onto the bandwagon, Moscow Mayor Yury Luzhkov followed Soros' statements with censure of his own, declaring Sunday that the mass privatization had been conducted too quickly and calling Chubais' methods "an economic disaster for the country."


Likewise, Harvard specialists who helped Chubais' team design the privatization process share in the failure, Luzhkov said.


Chubais, however, found a defender on Saturday in archrival and former Security Council deputy secretary Boris Berezovsky, who called Soros' comments "false" and "uncomprehensive."


"It's easy to say that privatization should have been conducted in another way," said Berezovsky, who is believed to be one of Russia's richest men and a beneficiary of the privatization process along with his fellow financial moguls.


"The price of a company depends on the conditions in which it was sold," Berezovsky said, referring to past difficulties of Russian companies in obtaining capital to participate in privatization auctions.


Soros' criticism comes after his participation last summer in a winning bid for 25 percent of Russian telecom monopoly Svyazinvest -- a bid led by Uneximbank, which has been accused of obtaining information about other bids from Chubais prot?g? Alfred Kokh, then head of privatization.


Soros himself said that describing the Svyazinvest tender "as a fair auction would be an overstatement," but he went on to credit the sale for disrupting "the whole arrangement that was prevailing" between contenders for the stake and in the end "led to the downfall of Russia's robber barons."


Following the Svyazinvest auction, the heads of many Russian financial-industrial groups attacked Uneximbank president Vladimir Potanin for his participation in the auction.


Soros reiterated past statements that he will not participate in an anticipated tender for shares of state-owned oil company Rosneft, and said he is not interested in bidding for a remaining quarter stake in Svyazinvest.


Privatization aside, Soros gave a positive assessment of Russia's economy, saying it was "starting now to pull itself together." He stressed that Russia's current success weathering the Asian stock markets crises is an important sign.


But a U.S. Treasury official stepped in to warn Russia that it must move quickly to reform its banking sector if it hopes to avoid an Asian-style backlash.


"The Asia crises have amply demonstrated that, while the right mix of monetary and fiscal policies is fundamental, governments must also ensure the safety and soundness of their financial system," Deputy Assistant Treasury Secretary Mark Medish said, in comments reported by Agence France Presse.


Medish also stressed that Russia needs to work on several other issues including tax law reform, compliance by large taxpayers and realistic budgeting.


The symposium, which ran from Friday through Sunday, brought together some 400 American and Russian business executives and officials.