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. Last Updated: 07/27/2016

An Amnesty in the Name of Growth

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Commenting on the Yukos saga, presidential economic adviser Andrei Illarionov came out on Monday with the first strong statement from someone in the presidential administration on the dangers of revisiting privatization -- even going so far as to evoke the specter of civil war. His words reverberated all the more powerfully given the complete inability of the Kremlin to date to formulate a coherent official position on the events of the past two weeks.

Illarionov's proposal to draw a line in the sand and effectively declare an amnesty (in all but name) on all privatization prior to a certain date seems an eminently sensible one under the circumstances.

It is increasingly clear that the deal that President Putin struck with the oligarchs three years ago -- that they could keep their ill-gotten gains, as long as they became good corporate citizens and did not interfere directly in politics -- has fallen apart. And it is no surprise, as there were never any hard-and-fast rules and the deal was always open to interpretation.

You would think that Putin, given his highly ambitious target of doubling GDP in 10 years, would be in favor of a measure that would secure property rights, and thereby create favorable conditions for growth.

But at the same time, one can't help feeling that the current state of instability and insecure property rights really suits the Kremlin down to the ground. The threat of reviewing privatization is a powerful instrument for ensuring the loyalty of big business; and the oligarchs' insecurity makes them a prime target for shakedowns of one sort or another, from "voluntary contributions" to the Kremlin's latest pet project to providing funding for United Russia's election campaign.

The state's schizophrenia is nicely captured in the different reactions of the government and Kremlin to the prosecutors' hyperactivity of the past two weeks. Members of the government, which bears direct responsibility for the economy, were fairly quick to condemn the prosecutors' actions and to seek to dispel the business community's fears. The presidential administration, on the other hand, its attention apparently absorbed by the upcoming election struggle, has been in no hurry to comment one way or the other.

It is true that legislating an amnesty on the murky privatization deals of the 1990s does not make for particularly good politics in the run-up to elections, but it could be made more palatable by combining it with a "windfall tax" on those that acquired the nation's crown jewels in the most egregious sweetheart deals, and perhaps staggering it in some way.

So what's it to be: Will control-freakery or liberal economic impulses win the day?