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. Last Updated: 07/27/2016

Illarionov Lambastes New Face of State

APAndrei Illarionov
Andrei Illarionov, President Vladimir Putin's maverick economic adviser, blasted the government on Wednesday for imposing a "corporatist" model on Russia that distanced the authorities from the people and skewed the playing field for businesses.

"The main outcome of this year is the formulation of a new, corporatist model for political, economic, social, public and international life," Illarionov said at a year-end briefing for reporters.

The state has built a so-called corporation, Illarionov said, "far removed from Russian citizens."

The new model means that some companies are slapped with back tax claims, while others are granted subsidies, he said. Likewise, the state invites foreigners into certain strategic companies but bars them from others.

Meanwhile, in the political realm, Illarionov said, "traditional means of getting feedback from society are being destroyed."

On Wednesday, the Constitutional Court affirmed the Kremlin's right to nominate governors, who before this year were chosen directly by voters.

Illarionov referred to a recent ranking by Freedom House, which for the first time since the collapse of the Soviet Union put Russia in the "not free" category, along with Afghanistan and Rwanda. In 2004, the New York-based think tank called Russia "partially free."

Going through his trademark list of the best and worse of 2005, Illarionov said that the "swindles of the year" were the state's increased intervention in the energy sector and its attempt to use energy as a "weapon" on the international stage.

Illarionov labeled the holding of IPOs and the issuing of extra shares of state companies in order to reinvest the raised funds as the "bad idea" of the year.

The state plans to sell up to 49 percent of state-run Rosneft in an IPO to repay a $7.5 billion loan it used to buy a majority stake in Gazprom.

"It's the same as taking tens of billions of dollars, planned to be raised from emissions, from the federal budget," Illarionov said.

State companies have gobbled up numerous private enterprises, including the country's largest heavy machinery producer, OMZ, and helicopter maker Kamov, Illarionov said. In September, Gazprom purchased private oil company Sibneft for $13.1 billion from billionaire Roman Abramovich.

Even though market watchers -- and Putin -- said that the state had paid the market price for Sibneft, Illarionov said it was not a fair deal. Clear rules for the Sibneft tender should have been announced months ahead of the sale to give foreign and domestic entities a fair shot at a bid, he said.

That was exactly how the reprivatization of Ukraine's Kryvorizhstal steel mill was done -- a controversial auction pulled off by Ukrainian President Viktor Yushchenko in October that Illarionov praised as the "foreign decision of the year." Mittal, the world's biggest steelmaker, came out on top with a $4.8 billion bid.

In the case of Sibneft, Illarionov said, a transparent sale may have netted more money than expected.

State interventionism is being pushed by members of the new "corporatist" order, Illarionov said. They join state and private companies, which effectively turn into state firms, he said.

The state is expected to gain a larger presence on the board of private carmaker AvtoVAZ at an extraordinary shareholders' meeting on Thursday.

"This is the emergence of a new ideology in Russia," Illarionov said. "It is not communist, socialist, liberal or nationalist. ... It is a sort of svoism."

Illarionov coined the term to mean "treating a different agent as one's own."

Illarionov's Best & Worst List
Idea of the yearCreating national projects
Decision of the yearEarly debt repayment begins
Event/lesson of the yearMoscow's electricity blackout
Surprise/"joke" of the yearRussians' reaction to the monetization of benefits; UES saying that Moscow may face blackouts while offering energy to North Korea, Iraq, Afghanistan and Pakistan
Swindle of the yearLoans to state companies; acquisitions of private companies by state corporations; using energy as a weapon outside Russia