30 years of Russian privatization: is it possible to revise the results and return what was given?

By the anniversary of privatization, Novye Izvestia talked to experts about whether everything can be returned and redone “correctly”.

In 2020, 61% of Russians claimed that our society is unfair. In many ways, the reason for this state of affairs was precisely the same privatization 30 years ago. Russian oligarchs have emerged thanks to its opaque rules, and compete in ostentatious wealth, while millions of people continue to work in privatized enterprises for pennies. And now, in addition, the size of assets frozen in the West and the number of seized superyachts of our billionaires are being revealed...

The transition to a market economy, which then gave so much long-awaited freedom, now does not please the people. Last year, 62% of Russians preferred the system of state planning and distribution, and only 24% of Russians support market relations based on private property. Is it possible to turn back history and redo everything so that social justice will prevail?

Why no one was able to realistically evaluate the assets of Soviet enterprises

Recently, Oleg Deripaska filed a lawsuit for 2 billion rubles against Oleg Tinkov because a former banker called Deripaska (and indeed all billionaires from the 90s) thieves. According to Tinkov , these people received their assets for a penny. At that time, the state really did not receive significant income from privatization - inflation ate all the profits. But what was the real value of these assets? Maybe Soviet enterprises really cost a penny, because the change of owners then took place completely different from what it is now? In the modern world, it is the norm to first restructure a business, get rid of excess ballast, and then put the assets up for sale in order to get the maximum profit. In the 90s, all plants, factories and enterprises were first transferred into the hands of private owners with all the giblets as they are, and then the new owners dealt with their property.

Dean of the Faculty of Economics and Business of the Financial University under the Government of the Russian Federation Ekaterina Bezsmertnaya gives examples that confirm that assets then went into new hands at a ridiculous price.

- Assets sold in the course of privatization were valued at book value as of January 1, 1992, which was sometimes ten times lower than their real value. According to some estimates, the country lost about 1.3 trillion rubles as a result of privatization. rub. It is no coincidence that the Italian historian J. Boffa described Russian privatization as "the biggest sale in history." The stock market, which is a barometer of the market value of companies, did not exist in Russia at that time, so the accelerated pace of the ongoing reforms allowed far-sighted buyers to buy state property for next to nothing.

So in 1995, Vladimir Potanin and Mikhail Prokhorov, through ONEXIM Bank, became the owners of Norilsk Nickel with an annual profit of $1.5 billion and a 70% profitability of transactions for a ridiculous $170.1 million. And in 1996, Mikhail Khodorkovsky, with the help of a bank Menatep received 45% of the oil giant Yukos for $159 million. Real estate in prestigious areas of Moscow and St. Petersburg was sold at prices not exceeding 1-2 years of rent, and, for example, An-72 aircraft were sold 6 times cheaper their residual carrying amount. Director of CROS for GR Petr Kiryan claims that in that situation there was simply no other way out but to distribute enterprises at a low price - there was no free money in the country.

- The assessment of the majority of privatized enterprises by today's standards turned out to be very low. However, we must not forget the conditions under which privatization took place. There were no banks or structures with significant financial resources in the country, such as to play on the increase in the price of privatized objects. In a number of cases, it was impossible to determine the price as such: how much did the land in Moscow cost, which no one bought or sold for more than 70 years? Finally, at the time of privatization, there were few foreign investors who usually raise asset prices – they came to Russia and asset prices rose in the late 1990s and the first half of the 2000s. Then it was already possible to talk about some kind of balanced assessment of businesses and property.

Intrigues of the West?

But with foreign investors, too, everything is not easy. The opinion that the privatization of the 1990s took place under the influence of Western countries has been around for a long time. There is logic in this: since it was unprofitable for the state to arrange such a sale, it means that there was the influence of external forces interested in a weak Russia. Supporters of the conspiracy theory found confirmation of it in the words of Vladimir Putin , who last year at a meeting of the Council for the Development of Civil Society said that in the mid-90s, CIA personnel worked in the government, who were later prosecuted in the United States for participating in privatization . After that, the head of the RSPP, Alexander Shokhin , explained that foreign specialists, consultants and intelligence officers were simply trying to make money on privatization themselves.

Political scientist Sergei Markov , who is well acquainted with the course of privatization, says that it could not have done without the intervention of the West. And they didn't even hide it.

- Foreign influence was huge. All these privatization plans were made primarily by foreign advisers. By the way, I myself participated in the survey of privatization plans. The Americans did it according to a fairly standard scheme, so the political responsibility for privatization probably rests to a small extent on the Americans. The studies that we conducted with the Americans showed very clearly that the economic efficiency of former state-owned enterprises that are being privatized does not increase.

Dean of the Faculty of Economics and Business of the Financial University under the Government of the Russian Federation Ekaterina Bezsmertnaya confirms that foreigners then had the opportunity to at least gain control over strategic objects.

- The hasty procedure for privatization made it possible for many foreign investors to obtain control over a number of strategically important enterprises in various industries during the sale of state property - in 1992-1993 there were no restrictions on the admission of foreign investors to privatization (with the exception of fuel and energy complex enterprises, mining and processing of ores, precious stones and metals, etc.). In particular, the analytical document of the Accounts Chamber mentions the fact that a certain American company Nic and Si Corporation acquired blocks of shares in 19 aviation enterprises of the military-industrial complex through a front company. And there are many such examples.

Officials and consultants approached the planning of privatization through the sleeves, they knew that it was going badly, but they still did not deviate from the chosen course. Well, the agents of the United States and Europe had to try hard to convince our government. But the Head of the Yandex Q-Community "Political Science" and a political scientist at Moscow State University. M.V. Lomonosov Artem Kosorukov is sure that he did not have to strain himself too much, the resulting privatization is the work of exclusively Russian officials.

- Privatization was carried out by the Government of the RSFSR under the direct supervision of the Chairman of the Russian State Committee for State Property Management A.B. Chubais. Although some of Chubais's advisers were, according to Putin, CIA personnel, the decision and direction of the privatization was carried out by Russian officials.

Who and why needed all this

It turns out that the state has earned almost nothing from privatization, the people have not benefited from this, millions of people have been put in a hopeless situation, they have lost their jobs, other states have not bought all of Russia. So why then did this privatization even have to be carried out? Director of the Center for Post-Industrial Society Research Vladislav Inozemtsev believes that in this way they fought against the political system: “Young reformers were sure that privatization would destroy the Soviet planned economy and – which seemed especially important – would prevent the return of the communists to power”.

Artyom Kosorukov also sees political overtones in privatization. He literally equates the sale of assets with a revolution.

- Privatization in the 1990s is a revolution in reverse. Only in contrast to the October Revolution of 1917, people's property was divided and given into the hands of the oligarchy, which grew out of yesterday's Komsomol members, state and party workers. Chubais, Gaidar and Yeltsin acted as analogues of Rykov, Lenin and Kalinin.

And Petr Kiryan is sure that during the privatization the state simply shifted the responsibility for the mess in management onto the shoulders of the new owners of enterprises.

- At the time of privatization, the state could not provide employees of state-owned enterprises with either decent wages or prospects. Privatization, the transfer of property for little or nothing, removed the headache of job security from the state. After it, all issues with the employees were solved by the owners.

Don't take back what's done

Thirty years later, today, society's request for social justice (including on the principle of "take away and divide"), for a return to the Soviet past, is also responding to the government. It is impossible to ignore the opinion of people, because back in 2016 43% of Russians were in favor of revising the results of privatization. So at the beginning of 2022, the leader of A Just Russia, Sergei Mironov , proposed in the State Duma to review the results of privatization and oblige the owners of enterprises to either pay extra or return assets to the state. And sometimes the authorities do not discuss, but simply act. So, in 2020, the court canceled the privatization of the Bashkir Soda Company, declaring it illegal. Now it's the turn of sanatoriums: the Prosecutor General's Office demands that the privatization of two sanatoriums owned by the Israeli company AFI Development in Minvody and 34 sanatorium complexes owned by the Federation of Independent Trade Unions of Russia (FNPR) be declared illegal.

Sergei Markov is convinced that the issue of unfair privatization should never be left open. Once the people have a request, it must be satisfied. At least partially.

- There is certainly some sense in revising the results of privatization, since these results are considered by the absolute majority of the population as unfair. And this makes the general social mood in society revanchist. Demands to reconsider the results of privatization will arise all the time. So the issue needs to be closed somehow. But 30 years have passed, it is difficult to find formats in which this can be done. There is such a principle of paying off - let them pay. But those who believe that the privatization was unfair will think that the payouts were paid unfairly - that those who privatized the enterprises just paid off a little, at a minimum. I would suggest not so much a revision of the results of privatization as more active management. That is, people who have privatized enterprises must demonstrate that their work is effective in the interests of society, and if not, maybe they should give it back.

Petr Kiryan claims that everything is complicated with the revision of privatization.

- In my memory, the Parliament twice raised the issue of "additional payment" for privatized assets. And so far no solution has been found. First, there is the question of who will pay. Not all assets remained under the control of those who received them as a result of privatization. Should the new buyer or owner pay for the deeds of the previous owners. Secondly, what about investments in the renewal and development of the assets received - these are also expenses that the owners, and not the state, borne. Finally, the doctrine of social responsibility of big business has been in effect for many years – in fact, business pays social tax annually, not once. The example of Bashsoda, as well as Bashneft, are still exceptions to the rule. They should not become the rule, because in this case they are put under the statute of limitations for various acts and property rights.

So Vladimir Putin, after Mironov's speech, stated that a revision is impossible. Artyom Kosorukov believes that an attempt to withdraw money from the owners will greatly harm the investment climate.

- Considering the president's statement and the statute of limitations, revising the results of privatization would not have benefited the macroeconomic situation in Russia, this page of history will have to be turned over completely, drawing lessons. China, in turn, has already done this, avoiding the privatization vector of capitalization of the economy and relying on long-term infrastructure loans under state guarantees.

They wanted justice and their share of privatized property, which was relied on by the voucher (in modern money, even if we take just the market capitalization of companies traded on the stock exchange, the cost of one voucher will be more than 246 thousand rubles), but in the end the carriage turned into a pumpkin? You can relax and no longer worry about it. Despite the fact that privatization was carried out according to foreign manuals, it had nothing to do with justice at all, and nothing could be done after 30 years. Gestalt will remain open.