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. Last Updated: 07/27/2016

Two Calls for a Deal With Oligarchs

Vladimir Putin's battle with the oligarchs often seems like the Iran-Iraq War. It's a shame that both sides can't lose. But there's one possible outcome in Moscow that would benefit everyone. That's a negotiated truce in which the oligarchs f in exchange for their business survival f agree to make changes that would create real businesses and capital markets in Russia.

"Putin should lock the power brokers in a room until they come up with an agreement to give something back f pay taxes, do some real investing, give back some of the phony privatization. He should say: 'You come up with a plan or I'll come up with a plan,'" says Fritz Ermarth, a former top Russia analyst at the CIA.

The process of negotiation toward such a truce could begin as soon as this week. According to Russian press reports, Putin may soon meet with the tycoons to discuss whether he'll reverse some of the privatizations of the mid-1990s.

That's the stick Putin wields f that he could, in effect, renationalize what the oligarchs looted from the state.

Bashing the businessmen would certainly be popular politically. The Russian people seem to like Putin's recent war against the oligarchs even better than they liked his earlier crusade against Chechen "terrorists."

But outright expropriation would be a bad move, not because it would hurt the oligarchs f who deserve whatever misfortune comes their way f but because it would further erode confidence in Russia's already fragile economy. Investors would worry that Putin was restoring a KGB-led police state and subverting the foundations of a market economy.

The oligarchs have already won some undeserved sympathy in the West, thanks to Putin's heavy-handed attacks.

An especially stupid move was allowing the police to arrest Vladimir Gusinsky, who, in addition to being an oligarch in good standing, runs Russia's only independent media company. The assault on Gusinsky made Putin look like an enemy of democracy rather than of corruption. Although cloaked in the rhetoric of law and order, it actually undermined those values.

And something is surely wrong when plutocrat-in-chief Boris Berezovsky gets to look like a good guy, as he did this week when he resigned his parliamentary seat in the State Duma in protest against Putin's tactics.

One of the leading oligarchs argued Friday that if the tycoons want to survive, they must clean up their act.

Vladimir Potanin, who runs the holding company that controls nickel giant Norilsk Nickel, said in an interview with the Financial Times that the tycoons should offer to pay more taxes and make other concessions f quickly f to improve their public image. "We should say to people: 'You think we were bad. But we want to be normal and socially acceptable,'" he said, adding: "Many oligarchs are tired of the lack of well-defined rules and are waiting for the Kremlin to define the guidelines."

The very fact that Potanin is talking compromise suggests that Putin's squeeze play is working. Earlier this month, Potanin was targeted by the prosecutor general, who demanded that he repay $140 million in alleged underpayments in the 1995 privatization of Norilsk.

So what sort of deal should Putin demand as the price for allowing the oligarchs to retain control of their companies?

Here's a simple proposal that emerged in conversations last week with several leading Russia-watchers. They suggest a truce that would require the oligarchs to bring their companies up to Western business standards. That means cleaning up corporate balance sheets, accepting modern auditing rules, negotiating enforceable legal contracts and paying what's owed in taxes.

Putin, for his part, should stop the goon tactics and embrace the rule of law.

He shouldn't offer a blanket amnesty to the oligarchs, any more than he should continue waging personal vendettas against them.

Investors in Russia, including the oligarchs themselves, crave political stability. Putin's goal shouldn't be to wipe out the tycoons but to create thousands more of them as Russian capitalism grows and prospers.

David Ignatius is a columnist for The Washington Post, to which he contributed this comment.