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Business Leaders On Differences In Russia

Washington, May 22 (RFE/RL) -- The two top officials of the U.S.-Russia Business Council say recent conversations with Communist leaders in Russia show that their views of the economy are so "fundamentally" different from the government of President Boris Yeltsin that the possibility of any coalition deal between the two is unimaginable.

There are not just "differences" but a "great divide" between the two sides, say Eugene Lawson, President, and Blake Marshall, Vice-President, of the Washington-based organization of major U.S. and Russian companies working to improve Russian-American trade, investment and business relations.

Lawson and Marshall spent last week in Russia, meeting with 15 officials and leaders, including Communist Party presidential candidate Gennady Zyuganov.

In a report to the Council's Board of Directors, made available to reporters, the two said that since the Communists and those aligned with the present government "can't agree on basic assumptions and trends, they certainly can't agree on policies."

"One of the most troubling aspects emerging from our conversations," reported Lawson and Marshall, "is that many Communist elites aren't close to grasping just how bankrupt the Soviet system was."

They said the Communist leaders believe the Russian economy is in a free-fall that is only going to get much worse and that the only solution is significant government intervention. Communist and other opposition leaders have been "noticeably quiet about the specifics of their economic platforms," say the U.S. business leaders, and in private conversations always mention their support of a market economy and the role of foreign business and investment.

However, they told the business council, talks with Communists like Yuri Maslyukov, the new chairman of the powerful Economic Policy Committee in the Duma, were "ultimately disconcerting and depressing" because they place the blame for all of Russia's economic woes on "western policy toward Russia and in particular (see) the IMF as the perpetrator behind Russia's collapse."

The IMF recently approved an extended loan facility that over three years could provide more than 10,000 million dollars in needed external financing to Russia, but it is dependent on continued compliance with a reform and stabilization program worked out in difficult negotiations. IMF officials say they would not cancel the program if the Communists win control of the government, but only insist upon continued compliance.

However, say Lawson and Marshall: "Our sense is that there are plenty of opposition figures who wouldn't hesitate to scrap the program and are not terribly concerned about Russia's 120 billion (120,000 million) dollar debt given their current difficulties."

Despite their pessimism, the two U.S. business leaders say western investors must look beyond the presidential elections and focus on the "work to be done" because no matter who wins the presidency, the Communist-controlled Duma is set for four years.

There are four key issues that Lawson and Marshall say are blocking significant foreign investment and deeply constraining "Russia's vast potential for future growth." They are: taxation, market access, energy policies and intellectual property rights. These are areas of concern for all investors and business people, foreign and domestic, they say.

They note that intellectual property rights protections are critical. "Companies with trademark and copyright concerns simply cannot make massive investments to refurbish existing manufacturing facilities and employ hundreds of Russian workers until their products are afforded the protection they have been guaranteed elsewhere around the world," say Lawson and Marshall.

Taxation is the other top problem for all business in Russia, they say. "The list of serious tax complications faced by companies grows monthly," they added, and "we return to Washington decidedly more pessimistic."

The U.S. business leaders say everyone in Russia -- opposition and government -- acknowledges that high taxes was a problem.

However, getting agreement on a comprehensive tax code seems extremely difficult, the business leaders say, and Yeltsin government plans to issue an executive decree does not suffice as an investor safeguard. "It seems to be the perennial fallback position, and at some point we have to move beyond merely applauding good intentions," they say.

Still, they add in the report, a question remains that even if Boris Yeltsin is re-elected, can his government "stay on track" or will it be tempted by campaign promises to spend floods of money it doesn't have and can't afford.

The council officials say their message to all Russians is that the benefits of foreign investment do not have to be inconsistent with the country's real economic development needs and that a partnership can bring winning results for both the Russian people and business investors.