Party Of Power Mulls The Merits Of Nationalization

Publication: Eurasia Daily Monitor Volume: 1 Issue: 32

Are the Russian government and the Kremlin’s political party pushing for a law that would give the state the power to nationalize private businesses? Earlier this month, one of United Russia’s leaders, Oleg Morozov, said in an interview that his party was working on a law on nationalization that would give the state the right to take possession of property and enterprises that are being ineffectively used by their private owners (RIA Novosti, June 2).

In a subsequent interview, Morozov said that United Russia’s draft law was in no way intended to be a means for overturning the privatizations of the previous decade and was, in fact, a way to codify nationalization to prevent “unfair de-privatization” and expropriations by individual bureaucrats. He also stressed that owners of such property would be compensated at market prices. But he insisted the state should have the right to nationalize property or enterprises under various circumstances, including when there is threat “to the safety of citizens and government intervention is required” or in situations involving “the security of state in general.” Morozov gave as an example a hypothetical situation in which an “object of strategic significance” such as an airport, a seaport, a railway or a military-industrial factory, is being ineffectively run, thereby threatening the security of

citizens. Asked whether this would apply to “objects” in the oil and gas sectors, Morozov replied that it could, depending on circumstances, but “not totally” – that is, it would not apply to the entire gas sector or oil sector, but perhaps to individual oil or gas fields “viewed as strategic” (Ekho Mosvky, June 3).

Needless to say, Morozov’s comments, given their rather wide scope for interpretation, quickly came under fire from a variety of apparently alarmed politicians and economists. Yevgeny Yasin, the former economics minister who is now academic director of the Higher School of Economics, called Unified Russia’s draft law on nationalization a “most harmful undertaking” that is “absolutely anti-reformist” and “dictated exclusively by the atmosphere of a witch-hunt, with the witch being Russian business.” Independent State Duma Deputy Vladimir Ryzhkov called the draft law “an infringement on private property in the country” and “conceptually unacceptable,” given that “if an enterprise has an owner and that enterprise is ineffective, then that is the owner’s problem, not the state’s.” Ryzhkov said that if the Duma passes Unified Russia’s draft law on nationalization, “then all the capital that can be taken out of the country will be taken out [and] no one – either our own people or foreigners – will invest a plugged kopeck here” (Ekho Moskvy, June 3). Even Sergei Glazyev, the Duma deputy and leading leftist economist, criticized the draft law. “Such an approach is nothing less than an attempt to shift the debts of negligent owners to the state budget,” he said. “Ineffectiveness may be criteria for bankruptcy, but not for nationalization” (MosNews, June 3).

In an apparent bid to stem such criticism, United Russia’s leader, State Duma Speaker Boris Gryzlov, denied that the party was drafting or even discussing a law on nationalization. However, he added, “this issue may be discussed during the fall session” of the State Duma (RIA Novosti, June 3). Meanwhile, another Unified Russia member, State Duma Property Committee Chairman Viktor Pleskachevsky, said the only version of the law on nationalization under consideration is one that was drafted by the government. “It is an absolutely harmless draft law involving the redemption of property at market prices in the case of state needs – if, for example, it is necessary to build a road across a plot of land” (, June 3).

If Gryzlov and Pleskachevsky managed to assuage the critics, new concerns over the nationalization issue were raised in comments made by Federation Council Chairman Sergei Mironov on June 8. Speaking about the growing number of strikes in the country, specifically those by miners in Rostov, Oblast and Khakassia, Mironov said that strikers were “employees of private companies” whose owners are violating the law and the Russian Constitution’s provision guaranteeing citizens the right to work. The solution, he said, is “a law on effective ownership.” Mironov added,” If an owner of an enterprise does not fulfill his obligations in the use of property, the state must have the right to take that property and there and then and sell it to another owner for a reduced price.” He predicted that both the Duma and the Federation Council would pass such a law (Itar-Tass, June 8).

Indeed, Gryzlov’s reassurances that a law on nationalization is not in the cards have failed to quell fears. Russky Kurier wrote that beginning next year, “the Russian government may have the right to nationalize any enterprise it chooses” (Russky Kurier, June 9). Echoing Vladimir Ryzhkov’s comments, Valery Goreglyad, the former Federation Council first deputy chairman who recently became an auditor with the watchdog Audit Chamber, warned, “If the authors of the law on nationalization are saying that certain state bureaucratic structures must determine whether enterprises are effective and on that basis make decisions about nationalization, then we will have no economic success here.” “But we need to look at the text of the law,” he added. “Maybe it’s not as terrible as we are saying” (, June 15).