In a Word

It's Final: Yavlinsky Is Out

Jan 24, 2012:

Liberal opposition leader Grigory Yavlinsky will not take part in the presidential race.

Central Elections Commission Secretary Nikolai Konkin has announced that in the second verification procedure 25.66% of signatures in support of the Yabloko nominee proved unreliable or invalid. This means that Yavlinsky will not be registered as a presidential nominee.

Billionaire Mikhail Prokhorov, also a candidate for the post, has condemned the removal of Yavlinsky from the race. According to Prokhorov excluding Yavlinsky would be ‘a blow to the legitimacy of the election’ because voters will be limited in their choice as the founder of the Yabloko party ‘represents liberal values’. The owner of the New Jersey Nets basketball team called the requirement to collect signatures ‘humiliating’.

Communist leader Gennady Zyuganov also condemned the Yavlinsky’s withdrawal from the elections. It is likely that he will get most of the protesters’ votes because if Putin fails to secure 50 percent of the first-round vote, Gennady Zyuganov will be his most likely contender in the run-off.

Thus, five candidates will take part in the race: Vladimir Putin, Gennady Zyuganov, head of the Liberal Democratic Party Vladimir Zhirinovsky, Mikhail Prokhorov and leader of Fair Russia party Sergey Mironov.

Sanctions Against Offshore Companies

Jan 24, 2012:

The new Civil Code may contain not only the requirement for offshore companies operating in Russia to disclose the names of the beneficiaries but severe sanctions for the violation of this rule.

It seems likely that offshore companies operating or holding assets in Russia will be asked to reveal their beneficiaries. So far, however, it has not been clear what would happen if such an entity broke the law.

If a company from a tax haven does not disclose its owners, the person acting on its behalf or just authorized to represent its interests may become liable for its debts. The company itself will be seen as acting in bad faith, its contracts terminated and everything it got will be returned to former owners.

Pension Reform Is Overdue

Jan 24, 2012:

Russia needs urgent pension reform, says Benedict Clements from the IMF’s Fiscal Affairs Department. Public spending on pensions in Russia has already reached 8% of GDP, which is just 1% less than in the developed countries, and in the near future the expenditure will rise due to rapidly aging population.

In the OECD countries the average rate of contributions to pension funds is 20% and the replacement rate (the percentage of pre-retirement income that is paid out upon retirement) is 54%.

In Russia, the contributions are higher, but pensions are lower and the retirement age in practice is 52 years for women and 54 for men. Because of the low retirement age, public spending is rising rapidly, despite low replacement rate. In 2030, government spending may reach 11% of GDP, by 2050 - 15% of GDP.

Criminal Investigations of Parliament Elections

Jan 23, 2012:

The official representative of the Investigative Committee Vladimir Markin has said that 26 criminal cases had been opened on violations during the parliament elections on December 4, 2011.

The Committee received over 350 applications about breaches of the election law. It has been decided not to proceed with official investigation in 158 cases. The number of criminal investigations may increase as the investigators are still examining over 100 cases.

Most violations concern bribing voters, ballot box stuffing, coercion to vote. ‘Violations concern almost all political parties,’ said Vladimir Markin. 'For instance, in Vladimir a local resident was detained in an attempt to stuff the 21st ballot into a ballot box in favour of one of political parties. In the Leningrad Region a woman was bribing voters, offering them 300 roubles ($10) for voting in favour of a particular party.'

Taxing Branches

Jan 23, 2012:

Prime Minister Vladimir Putin has suggested that branches of companies pay taxes locally and called for a change in the law to this effect. ‘Companies must pay taxes where they work. They should not create profit centres in Moscow. We need to amend the existing rules,’ said the head of the Government.

Yavlinsky is Out

Jan 23, 2012:

The most likely representative of protesters demanding fair elections will not, probably, be registered as a presidential candidate and will not participate in the elections on March 4.

Every fourth signature presented to the Central Election Commission in support of Grigory Yavlinsky, the leader of the Yabloko party, has been declared invalid. This is five times more than allowed by law. The final decision is still pending but if the preliminary results are confirmed, Grigory Yavlinsky will not take part in the race.

This would strengthen the position of the Communist leader Gennady Zyuganov. More importantly, Grigory Yavlisnky’s withdrawal would leave a small but active group of electorate without a candidate for the election.

As Russian law stands, a potential presidential candidate must collect at least 2 million signatures in about 6 weeks. The collection must take place in at least 40 regions, with no more than 50 thousand signatures coming from any one Subject of the Federation.

Political consultant Evgeniy Suchkov thinks that the task is impossible. One person can get 50 signatures a day. Thus, in order to collect 2 million signatures a candidate needs a whole army of 44,000 people. 'Neither Prokhorov nor Yavlinsky nor any other candidate has so many collectors', Kommersant quotes Evgeniy Suchkov.

Nominees from political parties elected to Parliament do not need collecting signatures. These are the ruling United Russia party, the Communists, the Liberal Democratic Party and Just Russia.

Tax Treaty Between Russia and the United Arab Emirates

Jan 20, 2012:

Investment organisations and sovereign wealth funds from the United Arab Emirates will be exempt from taxation in Russia under a double tax treaty signed in Abu Dhabi on December 7, 2011.

The agreement is not based on the OECD Model Tax Convention on Income and Capital and would apply, strictly speaking, only to state companies and companies wholly owned by the government. Private businesses will be able to benefit from the treaty by investing through public investment funds.

So far (the agreement is yet to be ratified), UAE sovereign investors in Russia have to pay a 20% tax on repatriated profits, 15% on profits from interest and 20% on capital gains.

The UAE is one of the world’s largest oil exporters. Its Abu Dhabi Investment Authority (ADIA), with assets between $400 billion and $600 billion, is among the largest sovereign wealth funds.

In Russia, UAE is considered a tax haven. The agreement, therefore, is tailored in somewhat extravagant way so that it does not apply to privately held companies.

TNK-BP Will Be Penalised by $60 Million

Jan 19, 2012:

TNK-BP Holding may be penalised by as much as 1.8 billion roubles (ap. $60 million) for breach of the competition law, announced the head of the Federal Antimonopoly Service Igor Artemyev. ‘The fine will be far more than 1 billion roubles, close to 2 billion roubles, about 1.8 billion roubles,’ he said.

Igor Artemyev also noted that the antitrust watchdog ‘has increased vigilance’ after President Dmitry Medvedev asked to keep an eye on prices for petrol.

The FAS seems to be in a state of war with oil companies since last February. The later, according to authorities, keep the price of oil products artificially inflated. Proceedings were instituted against Lukoil, Rosneft and GazpromNeft. There were ‘questions’ to Bashneft, TNK-BP and Surgutneftegas.

Restrictions On Cash

Jan 19, 2012:

Cash is the father of all evil. This is the essence of Russia’s Finance Minister Anton Siluanov’s proposal to restrict cash payments by a special law. Banknotes should not be used for large purchases, paying salaries and pensions.

‘In Russia, the total share of cash is 25% of the total money supply,’ says Anton Siluanov, ‘In developing countries this figure is about 15%, while in developed countries it is 7% to 10%. Unaccounted cash leads to an increase in the shadow economy which in Russia amounts to about 30% of GDP.’

Six month earlier, in July 2011, the Sberbank’s president German Gref suggested a total prohibition of cash transactions. The head of the largest bank in Eastern Europe suggested banning cash payments everywhere in Russia. Though few were against some restriction, the idea of total prohibition seemed nearly as grotesque as that proverbial drug dealer with a case full of bucks. German Gref argued that cash is the blood of the underground economy and fighting it would increase Russia’s GDP by as much as 1%.

Vasilievsky Slope Is Closed

Jan 10, 2012:

Dmitry Medvedev has signed a decree which, effectively, prohibits public meetings on the Vasilievsky Slope, a square near the Kremlin and a popular place of political gatherings. Just last month the opposition tried to organise here the mass rally ‘For Fair Elections’.

The decree adds the square to the territory of the Moscow Kremlin, a complex of buildings at the heart of Moscow and the official residence of the President. From now on any public event on the Vasilievsky Slope must be approved by the President.

Yet Dmitry Medvedev went even further than that: the decision making has become a complex and protracted process.

Few bodies can submit a formal request: the Government, the Federation Council, the State Duma, the supreme courts, the Moscow mayor and the Presidential Office. Individuals, non-governmental organizations or political parties are not included in this list.

The request must be filed no later than three months in advance and before that Federal Protective Service, which protects the President, must give its consent.