SARATOV OBLAST’S LAND PRIVATIZATION LAW

By Ilya Malyakin

Article 36 of the Russian Constitution states that:

“1. Citizens and their associations shall have the right to private property in land.

2. Owners may freely exercise their right to the possession, use and management of land and other natural resources, provided this does not cause damage to the environment or infringe upon the rights and interests of other persons.

3. The terms and procedures for the use of land shall be determined on the basis of federal law.”

This constitution was adopted at the end of 1993, when no parliament was in session. But, as became clear later, it contained many provisions which contemporary Russian society was not ready for, either psychologically or politically. The first of the three points was, perhaps, the hardest to accept, and because of this, there is still no federal Land Code. Its adoption has been blocked by the confrontation between the president and the Federal Assembly, and it is impossible to say how long this situation will continue.

The resulting “legislative vacuum” has created several problems. Strange as it may seem, it is not the legal and economic aspects which are the most serious. For the last few years at least, the Russian economy has existed without a Land Code, without suffering excessively. But in the political sphere, the tension has constantly increased–this is virtually the only issue where President Boris Yeltsin has not been able to overcome the will of the parliamentarians.

After convincing himself of their unshakability, he changed his tactics; instead of trying to influence the State Duma directly, he decided on a change of venue, to present his opponents with a fait accompli: from henceforth, land legislation would be formed “from below,” in the Federation subjects.

The history of Russia’s new land legislation is full of ambiguities and, in large part, can only be established through circumstantial evidence.

One of the hardest things to pin down is when the initiative was born. Only the following is known for certain: on October 13, 1997, Saratov Oblast Governor Dmitri Ayatskov unexpectedly said at a press conference that in his oblast, a law would soon be passed–the first such law in Russia–which would permit the sale of all forms of land, including agricultural land.

Just before that, Ayatskov had returned from a meeting in Nizhny Novgorod, in which Boris Yeltsin and many Russian governors had participated. According to some reports, it was here that the president said that it wouldn’t be a bad idea to exert pressure on the Duma “from below” on the issue of the Land Code. Clearly, there must also have been some private meetings, in which the president stimulated the regional leaders’ interest in his proposal.

Many then expected that there would be a “race” among Federation subjects to be the first to resolve the land issue. Obviously, the Saratov governor, who was in such a hurry to outdistance his competitors that he made his press conference before he consulted with the Oblast Duma deputies, was counting on this.

But reality showed that this indecent hurry had been pointless–there had been no “race”; most Russian governors preferred not to get involved in Moscow’s political feuds, and Tatarstan turned out to be Saratov’s only “rival.” In fact, even Tatarstan proved to be in no hurry; it only came out with its own land law five months later.

There are a number of other circumstances which could explain Saratov’s rapid start. This event must be seen in the context of other actions taken by Governor Ayatskov, such as his ordering agricultural producers to bring in a record harvest, his announcement of his intention to be the first in Russia to legalize prostitution, or his recent decision to send a trainload of grain to the miners in Primorye. All this is compelling evidence that Ayatskov is not simply looking for recognition from the center as a “strong regional leader”; he also intends to become an independent politician on the federal level.

But there was, it seems, a more trivial reason–money. Under Ayatskov, Saratov Oblast has made quite a bit of progress on many problems: in 1997, an unprecedented number of schools and hospitals were built; housing construction emerged from the coma which it had been in for many years and the gasification of rural areas was practically completed. But all these successes were achieved by what is commonly called “living beyond one’s means.”

The gubernatorial elections in Saratov were one of the first campaigns after Yeltsin’s victory in the presidential elections, and the prologue to a wave of such campaigns which rolled across the subjects of the Russian Federation, and therefore, they had special propaganda significance. Dmitri Ayatskov’s victory was to serve as a banner of victory over the Communists at the regional level.

One of Ayatskov’s main campaign slogans was that it would be easier for him to get Moscow to pour money into the region. In fact, after the elections, the money did come pouring in–after his victory, Moscow promised to pay all its debts to Saratov Oblast.

This “financial tide” served as the foundation for the burst of progress mentioned above. Trying to build on this success, the governor’s team turned to local banks, and later, to Moscow banks, for credits. When this money, too, began to run out, the time came to look for new sources of funding. Then, two problems emerged: establishing contact with foreign investors and the search for additional internal reserves. The passage of the law permitting the sale of land would make it possible to kill two birds with one stone–it would make the oblast more attractive to Western investors and would bring in new budget income through rents, land operations, and the taxes connected with them. And according to the new law, all such income would not have to be shared with Moscow, but would remain in the region. Moreover, in conditions of economic crisis, offering land as collateral might be the only way that the oblast could attract additional credits.

It cannot be said that Ayatskov’s initiative was unanimously well-received in Saratov Oblast. On the contrary, even supporters of private property in land were wary of it. But public opinion was not particularly important, without mechanisms which would give it influence over the governor’s authoritarian regime in the region.

Formally, there were public hearings on the bill–but this entire process took place under the strict control of local government bodies. The only exception was the discussion which took place at a session of the independent “Saratov Political Analysts’ Roundtable.” Its participants listened to both the authors of the bill and its opponents.

At this roundtable, the law’s most consistent and articulate opponent, Professor Vladimir Zubkov, stressed that passing a law which permitted the free sale of land would hit rural areas the hardest. The rural population was not ready to make the transition to a new reality. The peasants, according to Zubkov, had no money to buy land. This applied to independent farmers as well, 85 percent of whom were on the brink of ruin. If land sales were permitted, land would quickly become the property of banks and “the owners of criminal capital.”

Moreover the law had loopholes which made it possible to circumvent the toughest limitations, such as the minimum price on land, the level of which is determined by directive. Here, Zubkov cited numerous instances in which criminal elements have forced citizens to sell, or even give them, housing–the law does not rule out the possibility of such “gifts.”

Most of the other participants in the discussion were also cautious about the new law. They pointed out that it was impossible to predict all of the possible collisions which would arise after the passage of a federal Land Code. Analysts were bewildered that the draft was submitted to the Oblast Duma without being reviewed first by independent experts.

Indeed, it was difficult to make any assessment of the bill at all. The drafts were constantly changing. But this did not prevent them from putting the draft up for a vote just half an hour after the report of the chairman of the Oblast Land Committee, Nikolai Budnikov, who had said virtually nothing about the substance of the bill, but concentrated only on the political and economic need for the law. In spite of some timid criticism, only one deputy actually voted against it.

The law was passed on its second reading on November 12. The special session of the Oblast Duma, which was specially convened to examine this issue, lasted only an hour and ten minutes, and was marked by a scandalous event. That day, demonstrators from the KPRF, who were picketing at the entrance of the Duma in protest against the buying and selling of land, were dispersed by the police. This was the first time in seven years that a political action–even one not sanctioned by the government (the special session was deliberately scheduled too early for the opposition to notify the authorities)–was dispersed. Again, there was no serious debate, although this time, the deputies did show that they were familiar with the document being discussed. The law was passed in its second and final reading.

The events in Saratov were met with a stormy, but quite predictable, reaction in Moscow. Representatives of the presidential administration, who had visited the oblast when the bill was being drafted, expressed support for Ayatskov’s initiative and were confident that other federation subjects would soon follow Saratov’s example.

In the State Duma, the Saratov law became the object of serious discussion. The leaders of most parliamentary factions opposed it. A special resolution was passed, calling on the Saratov Oblast Duma to return the bill for a third reading. But there was no reaction from Saratov. The law remained in force.

The law’s critics had every reason not to trust the Saratov initiative. Experiments in land sales which had taken place in other federation subjects were unsuccessful. The widely-publicized land reform in Nizhny Novgorod Oblast was one such negative experience. Land trading there led to a situation in which most of the land was concentrated in the hands of former collective farm leaders. One could not seriously say that the experiment had led to more effective land use.

The doubts turned out to be justified. Half a year after the law’s passage, it has had virtually no positive influence on the oblast’s economy. The amount of money it has brought into the oblast budget is negligible. There have been five widely-publicized deals in which oblast and municipal land has been sold or rented out, but the predicted land boom has not materialized. The right to put up land as collateral for loans has not been exercised at all. Even the oblast land survey is not finished, and its absence makes land transactions very difficult.

But the extremely small number of such transactions can hardly be blamed on the absence of a land survey–most likely, it is the result of something else, as independent experts have frequently pointed out.

The main problem is that Saratov Oblast is not a state in its own right. As part of Russia, Saratov, with its lack of restrictions on the buying and sale of land, looks more like an attractive-sounding irrelevancy than a beachhead won by the supporters of new economic relations. In reality, a local law can only be drafted after a federal Land Code is passed and all of the contradictions between it and local legislation are cleared up. Certain provisions of Saratov’s law will most likely be overturned; for example, the authority to regulate normative land prices will most likely revert to the center.

However, this does not mean that the Saratov Oblast land law is dead in the water. The situation has changed drastically, if one looks at it not from the economic, but from the political point of view. The law’s passage has noticeably improved the image of both the region and its governor, and has attracted the attention of the press, the federal center and foreign investors. Within the oblast, the law has been mythologized as a great achievement, has been declared one of the foundations of a “regional ideology,” and has been made the basis of a local economic development program so ambitious that some compare it to Khrushchev’s program to “build Communism by 1980.”

Earlier, it was mentioned that Saratov Oblast has found at least one imitator. Recently, a similar law was passed in Tatarstan. And although not very much time has passed since then, one may suppose that in that republic, it will be more effective.

Tatarstan’s situation within the Russian Federation differs significantly from that of the rest of its subjects. There, people are accustomed to living their own lives, relying on their own potential for economic independence, and only rarely taking a look at the federal center. Moreover, the “special relations” between Moscow and Kazan permit one to suppose that the need to reconcile Tatarstan’s land law with a federal Land Code will not be too serious. All this gives Tatarstani law much more permanence than Saratov’s.

But the fate of both laws is in question from a purely legal point of view as well. On May 15, a hearing was held in the Saratov Oblast Court on a claim by the Russian Prosecutor General’s Office that certain provisions of the Saratov land law are invalid. On the first day of the hearings, the Prosecutor General’s Office’s representative laid out the claim in detail, which boiled down to the fact that certain of its provisions contradict federal legislation or have no force in the absence of a number of federal laws. In response, the governor’s representative cited passages from federal laws in support of each disputed passage in the land law.

The following day, after debate, the Judicial Collegium on Civic Affairs of the Oblast Court denied the claim.

Observers of the proceedings called attention to the oddly passive behavior of the Prosecutor General’s Office’s representative, who acted as if he was not trying to win the case. People had the impression either that the claim was only pro forma (so that nobody could blame its authors for not taking the step), or that the main events would only take place at a higher court, to which the Prosecutor General’s Office had no right to appeal unless it filed a claim in the Oblast Court first. But as yet there is no information on the Prosecutor General’s Office’s future plans.

The Saratov Oblast leadership is proud that it has been able to defend its legislative brainchild and is publicizing its victory. In the absence of significant economic effect from the land law, this victory is less flashy, but more principled.

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