Twitter
Advertisement

Business must return from 'offshore shadows': Vladimir Putin

Putin decried the illicit use of offshore structures by Russian state businesses to spirit cash out of the country and ordered them to return from the "offshore shadows".

Latest News
Business must return from 'offshore shadows': Vladimir Putin
FacebookTwitterWhatsappLinkedin

Prime Minister Vladimir Putin on Monday decried the illicit use of offshore structures by Russian state businesses to spirit cash out of the country and ordered them to return from the "offshore shadows".

The comments by Putin, who has launched a bid to return to the Kremlin next March, mark his clearest indication to date of concern that accelerating capital flight is being partly driven by corrupt schemes run by managers at state businesses.

Net capital outflows totalled $74 billion in the first 11 months of the year, central bank data show, and are running at their fastest rate since the 2008-09 financial crisis.

"It's time to put an end to the offshore legacy of the era of wild privatisations," Putin said, referring to the state selloffs of the 1990s that created instant fortunes for Russia's business 'oligarchs' who shifted their wealth abroad.

The wide-ranging nature of Putin's comments is likely to raise concern among publicly traded firms in sectors such as metals and mining, telecommunications, power, real estate development and retail that are owned via offshore structures.

Since Putin first became president in 2000, the government has pressed companies to return to Russia, suspecting them of using their offshore status to minimise their tax exposure.

The companies counter that they prefer to base themselves offshore because they cannot get adequate redress in the Russian courts and consider the protection of property rights at home to be inadequate.

As a result, some 55 percent of accumulated foreign direct investment into Russia comes from companies registered in Cyprus or the Netherlands - some $70 billion in total. Most of that is believed to be money of Russian origin.

"Returning the Russian economy's strategic sectors from the offshore shadows to the national economy is our priority task for the next period," Putin said, speaking at a meeting of a government commission on energy policy.

FLOCKING TO LONDON

Putin's comments came on the day that shares in two Russian companies, steelmaker Evraz and gold and silver miner Polymetal, began trading in London as constituents of the prestigious FTSE 100 share index.

The companies, whose assets are primarily in Russia, were attracted to list abroad by a deep pool of international investment capital and the prospect that they can use their shares as currency for international acquisitions.

Others, such as Polyus Gold, may follow but need to win the approval of a commission chaired by Putin that rules on transactions in a swathe of 'strategic' sectors covered by Russia's foreign investment law.

Clarifying Putin's remarks, his spokesman Dmitry Peskov, said they were primarily aimed at "highly corruption-prone" offshore schemes often used by state companies.

"Although we don't have direct indications of violations, it is obvious that these schemes are being used so that some kind of structure affiliated to a state company gets deals or money," Peskov said.

"Big business can work like this if it is privately owned, but if we are talking about state-owned businesses, it's Putin's view that this is a very negative manifestation."

Putin told officials and state firms - including gas export monopoly Gazprom, oil pipeline monopoly Transneft and state-controlled banks Sberbank and VTB - to report back on steps taken in two months.

Other state-owned firms he named were Russian Railways, shipper Sovkomflot, state development bank Vnesheconombank and nuclear power firm Rosatom.

"There should be absolute clarity concerning the structure of ownership, with real shareholders and beneficiaries," said Putin.

"This is a key indicator of how civilised the business climate is, the maturity of the economy and the level of responsibility of the business community," he added, saying his comments did not only refer to the energy sector.

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement