Privatization Chief Says Sell-Off Drive Is 'Threat'

Russia's privatization chief has attacked the country's extensive sell-off drive, describing privatization as a threat to state security and calling on the government to bring some companies back into state hands.


Russian newspapers on Friday quoted Vladimir Polevanov, deputy premier and head of the State Property Committee, as saying he would insist on the nationalization of "wrongly privatized" industry, especially in the aluminum, energy and military-industrial sectors.


"Like day has night and life has death, privatization (should have) nationalization," Izvestia quoted Polevanov as saying in the strongest indication yet of his policies since he was appointed in November.


The extent of Polevanov's power to follow through on his words is not yet clear. Arkady Yefstafyev, press secretary for former privatization chief Anatoly Chubais, has said that Chubais will retain much control over sell-offs in his new position as first deputy prime minister.


The daily Sevodnya said in a front-page article: "It is known that Chubais is not only against Polevanov's nationalization line, but is trying to oppose it with his actions."


Polevanov told Izvestia he was worried that foreign investors were winning the right to join companies' boards by buying 15-percent stakes in aluminum and defense firms.


"This directly threatens the country's national security," Polevanov was quoted as saying.


President Boris Yeltsin appointed Polevanov to head the privatization agency during a big cabinet reshuffle following the ruble's crash to record lows. The former privatization chief, Anatoly Chubais, the mastermind of a campaign described as the biggest sell-off of state property in history, was promoted to first deputy prime minister in charge of the economy.


Segodnya quoted Polevanov, who says some members of the government and the president's administrations supported his ideas, as saying the cabinet should "change its economic line and increase the state management of enterprises."


Izvestia said employees of the State Property Committee were in shock. "We feel as if there is a bomb in our building," the newspaper quoted a senior official at the agency as saying. State Property Committee officials could not be reached for comment Friday.


Russia launched its privatization drive in 1992, issuing all citizens with free vouchers which could be swapped for shares in state-owned firms. They expired on June 30 and voucher auctions have been replaced by cash auctions where investors bid for shares in firms once owned by the state.


Chubais said in November that about 75 percent of Russia's small enterprises and service sector had been privatized. However, the sale of shares in aluminum plants has prompted great domestic concern.


Earlier this month the State Property Committee and Federal Property Fund ordered a temporary halt to selling shares in these plants or registering new owners until an investigation into ownership and registration was completed.


The move came on the heels of a scandal at the Krasnoyarsk Aluminum Factory, where company directors deleted from the shareholders' register most of a 20-percent stake held indirectly by the British metals-trading firm Transworld. Economics Minister Yevgeny Yasin on Thursday called incident "extremely dangerous" for foreign and domestic investment, and said that the case should go to court to confirm Transworld's property rights.


Polevanov also suggested that import taxes be increased to raise cash for investing in newly nationalized industries. This would, at the same time, support domestic producers.


Sevodnya criticized the idea, saying: "It would be more realistic to suggest that if import taxes are raised, imports will fall and incomes to the budget will be lower. This will effectively cut the country's investments resources."


(Reuters, )