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. Last Updated: 07/27/2016

OECD Slams State for Meddling in Economy

The Organization for Economic Cooperation and Development on Monday accused Russia of abandoning important economic reforms and advised the government to stop meddling in the economy.

"There has been evidence recently of a drift towards more interventionist, less rule-governed -- and sometimes predatory -- state behavior," the Paris-based club of the world's 30 largest economies said in a report.

The report comes amid growing criticism of the government's tightening grip on the energy sector, as it moves to prevent foreign companies from developing Russia's most lucrative oil fields.

Earlier this year, the government withdrew exploration tenders in the Krasnoyarsk region and Barents Sea reportedly because the state-owned company Rosneft was afraid it would be outbid by Russian-British joint venture TNK-BP.

The OECD report also criticized how the government regulates the economy.

"The combination of excessive regulation, frequent rule changes and inconsistent application makes it very difficult for domestic and foreign businesses to be sure they are on the right side of the law."

Reforms have virtually stalled since Vladimir Putin's re-election as President in March 2004, the OECD said.

"In the run-up to the 2003-2004 electoral cycle [for parliamentary and presidential elections], some very difficult reforms were pushed through. But after the reorganization of the government, we've never seen that kind of momentum again," William Thompson, a senior economist at the OECD, said in a phone interview.

The organization advised Russia to foster competition by breaking the stranglehold of state monopolies over their sectors.

It also said the state should reduce its ownership in the natural gas, electricity, railway and banking sectors.

The OECD also claimed to have "evidence that managers in the major state monopolies have pilfered cash from them."

An official from the organization declined to specify to which companies the allegation refers. In the past, Gazprom minority shareholders have several times pointed to unclear or overly complex transactions involving the gas export monopolist and its subsidiaries.

The shareholders have also questioned what they say are inflated prices that Gazprom pays for its pipes and other materials. "Gazprom stands out, even in Russia's highly secretive corporate culture, for its exceptional opacity," the report said.