Install

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

. Last Updated: 07/27/2016

Tycoons Talk Corruption in Kremlin

The so-called union of oligarchs rolled into the Kremlin on Wednesday night to chat about corruption, a problem the president said needed time to fix.

"This is a problem that cannot be resolved momentarily," Putin said in televised remarks. "Corruption cannot be uprooted using only punitive measures," or through revising the state's functions, he said.

A $30 billion problem by some estimates, corruption has flourished over the past decade, to the detriment of small and medium-sized businesses and Russia's standing in global ratings.

Putin and about 25 representatives of the Union of Industrialists and Entrepreneurs, or RSPP, agreed corruption is an increasingly pressing problem. Even as big businesses aim to streamline their holdings, meaning potentially massive layoffs, bureaucracy maintains its stranglehold on small and medium businesses, leaving fewer opportunities for the newly unemployed.

"It would be much more productive to create a situation in the market where it is easier to follow the rules than break them," news agencies reported Putin as saying. "I'm talking about destroying the breeding ground for corruption.

It was the first time business's big guns had sat down en masse with the president since May, when the RSPP put aside plans to discuss corruption to focus on more pressing issues, such as tax and pension reform and bankruptcy laws.

With a number of those issues settled, or at least under discussion, corruption has risen on both the government's and RSPP's list of priorities.

"The problem of how government institutions function is coming to the forefront," Severstal chief Alexei Mordashov said. "One the one hand, everyone has noticed improvement. But on the other hand, the army of bureaucrats is growing and this is one reason reforms are spinning their wheels."

"Many bureaucrats understand the strengthening of the government to be the strengthening of bureaucracy," Mordashov said. "While strengthening the government is absolutely correct, increasing bureaucrats' powers impedes business."

Bureaucracy continues to stunt the growth of new business, he said, citing a business partner who spent half a year collecting 137 signatures and permits in order to open a retail chain.

Putin appeared to hold the same opinion: "We see there has been no real improvement," despite a raft of laws passed over the past two years to reduce bureaucracy.

Laws either are not followed or are not fully enforceable, he said.

Yukos head Mikhail Khodorkovsky said the government "must be willing to show its readiness to get rid of some odious figures" in the government to prove its readiness to combat corruption, "even though corruption is one of the hardest crimes to prove."

Putin promised that the tax burden on businesses -- and the red tape that comes with it -- would continue to ease.

"The tax burden must be lightened and there should be no doubt about it," he said.

Putin also took the opportunity to fire a few shots across big business's bow.

"I would like to hear concrete suggestions from you about what we should do, not just criticism," he said. "I know there's going to be criticism tonight, and I too can criticize."

When Khodorkovsky demanded that Economic Development and Trade Minister German Gref, who is also chairman of state-owned oil company Rosneft, reveal some details about Rosneft's acquisition of medium-sized crude producer Severnaya Neft from Senator Andrei Vavilov, Putin said a discussion of how large private oil companies created their holdings would be apropos.

Khodorkovsky said he and other business leaders share some of the blame for government corruption.

"You can say that it all started with us," The Associated Press quoted him as saying. "Well, it started at some point and now it must be ended. The situation has come to a head."

In the end, the Putin asked the lobby to join in the battle against corruption.

"The government alone cannot solve the problem," Mordashov said.