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DANCES WITH
BEARS
White nights and mining
rights
By John Helmer
MOSCOW
- Among courtiers, courage of conviction is rarely a
qualification for the job. It can, however, help in
dealing with insults, the occupational hazard that comes
with paying court to most sovereigns.
By this
standard, Dmitri Kozak, deputy head of President
Vladimir Putin's administration, is no Vauban Le
Prestre, Marshal of France at the start of the 18th
century. The difference between them I'm coming to.
Their similarity is that both tried to change the way in
which land and the resources are taxed in a state
reduced to poverty by the folly and greed of its
leadership.
Vauban was a siege engineer, a
military profession that was crucial in the wars of King
Louis XIV. Vauban was so good at this that the king
decided to promote him to marshal in 1703. What Vauban
didn't reveal until four years later was that, while he
had been laying sieges against France's enemies, he had
also been conducting secret research into every form of
taxation in the country. From this Vauban produced a
book in which he explained how the system had
impoverished France's producers, enriched the privileged
few, weakened the army and shorted the king and treasury
of what an uncorrupt and equitable system could provide.
The book then recommended a new, simpler tax regime,
based on encouraging higher yields from production in
land and industry.
It isn't known for certain
that King Louis read Vauban's book, but he left no doubt
what he thought of it. He told Vauban to his face that
he was a lunatic and a scoundrel. Historians of the time
record that lobbying by everyone who derived wealth from
the system of tax-farming and privileges Louis had
created was so intense, and the king's reaction so
implacable, it led to Vauban's premature death after a
few months. That was in 1707.
At the end of July
this year, Kozak made a brief announcement of a proposal
as radical, and almost as comprehensive as Vauban's.
At present, Russian law provides that subsoil
resources belong to the state, which grants licenses for
their exploitation by competitive tenders. The federal
and regional governments share control of the licensing
system, while they, along with local governments, tax
the proceeds of mining. Once licensed, the resources
extracted - oil, gas, minerals, precious metals,
gemstones - are the property of the companies that
produce them. As everyone realizes, since the collapse
of the Soviet system, Russia's economy and trade depend
inordinately on this type of primary production, while
the burden of government revenue collection falls
elsewhere. The vast profit of mining and oil and gas
extraction is stripped from the country, and deposited
in safe havens, beyond reach.
Kozak's proposal
calls for amending Russian legislation so that the
resources in land remain the property of the state until
sold, with mining and producing companies granted
concessions by the state on a cost-plus basis. Plainly,
this proposal threatens not the new private and
corporate ownership of Russian capital, but the flow of
income from that capital which the corporate oligarchs
consider their preserve.
The idea didn't come
from Kozak. One of the strongest critics of the existing
license system for miners and oil and gas producers is
Vladimir Litvinenko, rector of the St Petersburg Mining
Institute. He is an advisor to Putin; he supervised
Putin's doctoral thesis on resource policy in Russia.
Litvinenko has said in the past that he favors bringing
Russian resource policy into closer alignment with South
African, Australian and Canadian standards, and tougher
implementation of their use-or-lose requirements.
Litvinenko and a group of like-minded academics were
behind the proposal Kozak released. They know it isn't
more radical than South Africa's new mining legislation,
which orders an unprecedented transfer of assets to the
black population of the country in compensation for
their exclusion from the benefits of ownership under
exclusive white rule.
Notwithstanding this and
other foreign precedents, and apparent backing from
Putin's circle, Kozak's proposal came under an attack no
less than withering than the one Vauban encountered. The
oilmen declared the proposal ridiculous, with no chance
of acceptance. The miners said it was unconstitutional.
If implemented, they chorused, the proposal would
destroy the Russian stock market. There were even hints
that the proposal was nothing more than Kremlin
blackmail to extract financial contributions for the
upcoming national election campaigns.
Kozak
didn't defend the proposal, and the government
ministries responsible for natural resource policy and
taxation declined to announce their interest in
evaluating, let alone supporting it.
Encouraged
by the Kremlin's silence, the Russian business press
opened its pages to manifestoes from a handful of oil
and banking executives, who visited Kozak, and then
announced on his behalf that he had changed his mind.
Within days, Kozak's proposal seemed as dead as
Vauban's.
Never in the brief history of modern
Russia has such a matter been banished from court with
such swiftness and ridicule.
(©2002 Asia Times
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