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Russia: Putin In Germany To Promote Foreign Investment

  • Breffni O'Rourke

Chancellor Schroeder (left) greeting President Putin in Hannover Russian President Vladimir Putin is in Germany for talks with German leaders on political and economic issues. He also visited the world's biggest trade show for industrial technology, the Hannover trade fair, in an effort to promote foreign investment in Russia. But in Moscow, a drama is being played out that sends a different message to investors -- that is, the trial of Mikhail Khodorkovskii, the former head of the Russian oil giant Yukos. Many believe the Kremlin is punishing Khodorkovskii for financing opposition political parties.

Prague, 11 April 2005 (RFE/RL) -- Russian President Vladimir Putin's visit is meant to show German business that Russia remains an exciting and safe place for foreign investment.

He is also renewing his personal ties with Chancellor Gerhard Schroeder, at a time of increasing international concern about Moscow's moves to assert control over some of Russia's most prominent businessmen.

Putin and Schroeder together opened the huge Hannover trade fair yesterday. Earlier at the airport, the chancellor called for stronger German-Russian ties, which he said would help the European community as a whole.

"[There is] superb Russian and German cooperation in the political and economic field," Schroeder said. "Growth rates are in double figures. We want to strengthen this, we want to build on this, so that it should be noted that Germany and Russia are linked by a strategic partnership and the same is valid for Europe. I also think that we will succeed."

But not everyone in the West is so upbeat on Russia.

Moritz Schularick, an economic analyst with Deutsche Bank, said the perception among Westerners is that the climate for investment in Russia has taken a turn for the worse, and Putin is now trying to reverse that perception.

"What is fair to say that in the Kremlin there has been a lot of nervousness in the past three months, when the Russian [economic] growth rate has slowed considerably in January and February, and this was due -- among other factors and despite very strong oil prices -- this was due to a depressed investment spending," Schularick said. "I think the Kremlin has woken up to the fact that a lot of damage has been done to the investment climate, and they are now repairing the damage."

This "damage," Schularick said, is a result of heavy-handed government dealings with Russian big business.

In the latest example, the trial in Moscow of the former head of oil giant Yukos, Mikhail Khodorkovskii, is now coming to a close.

Khodorkovskii and his business partner, Platon Lebedev, face charges of fraud, embezzlement, and tax evasion, and could be jailed for up to 10 years if found guilty.
"Any allegations that Russia is preparing to revise the privatization results are groundless." -- Russian President Putin


Many inside and outside Russia believe Putin is punishing Khodorkovskii for financing opposition political parties.

Putin denies this, saying authorities are simply cracking down on a tax cheat.

Schularick said the Russian government is taking measures to placate doubts among investors and win back their confidence, such as making it harder for authorities to claim back taxes.

Putin, speaking alongside Schroeder in Hannover yesterday, stressed that his government wants to make it easier to do business in Russia.

"Any allegations that Russia is preparing to revise the privatization results are groundless," Putin said. "On the contrary, we are currently considering reducing the prescription period of privatization deals from 10 to three years to stabilize ownership relations and not to allow any possibility of redistribution [of property]."

As for Schroeder's continued enthusiasm for Putin's Russia, analyst Peter Zervakis of the German Bertelsmann Foundation said Germany is taking its "Russian project" seriously. This means that Berlin is ready to accept blemishes in order to keep Russia engaged with the West, for mutual benefit.

Zervakis said that "what Russia is offering does not contain the guarantees of a Western-style liberal constitutional state, there is no question of that, but it depends on what view one takes: one can boycott [Russia] or -- like the Americans, one can make sharp appeals to Moscow to restore a rights-based state -- but one can [also] follow a course of quiet diplomacy and creating bonds."

Zervakis said he sees in the Schroeder government a clear attempt to follow the latter course -- namely, to bind Russia to the West through bilateral ties, and through multilateral ties to the European Union, while pressing for democratic values. Without that, he said, Russia will remain a potential threat to European stability.

"We know that the uniting of the continent cannot be achieved without Russia," Zervakis said. "It would be fatal to think that we can call a halt to this effort with the [completion of the] present expansion of the European Union [to the East]."

Analysts Zervakis and Schularick also note that on a purely economic level, Russia is playing an increasingly vital role in Europe with massive gas and oil exports and a market that stretches to the Pacific Ocean.

Germany is already Russia's biggest trading partner, and its needs for vast infrastructure improvements dovetail with Germany's strengths as a supplier of engineering skills and heavy machinery of all sorts.
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