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Russian oil plant. Photo: unknown

Suggested readings

There is an interesting NYT article which described the early stages of the creation of NIPEK, "Russians Take a Flier on Oil In Capitalism for the Masses," published in January 1992:

"Nipek, a company with roots in the oilfields of western Siberia, is not making specific promises, although its salespeople talk vaguely about a 20 percent return on investment.

But what appeals to investors like Mrs. Revazova is Nipek's connection to oil. The word still has a promising ring to Russian ears, despite the difficulties of the industry here. Oil production has fallen steadily, and according to one estimate, by the end of 1993, production will have dropped by 20 percent compared with 1991. The reasons are to some extent connected with the overall decline of the economy, resulting in a reduction in capital investment, a shortage of equipment and confusion over which layer of government is responsible for the oilfields."

In Owning Russia: The struggle over factories, farms and power (2006), Andrew Barnes talks about the establishment of NIPEK and its initial accumulation of wealth.

Russian privatisation is also discussed in Marshall Goldman's "The Piratisation of Russia – Russian Reform goes awry" (2003): as its title indicates, it offers a critical assessment of the impact of the privatisations of the 1990s.

Read the debate between Goldmann and the Swedish economist Anders Aslund on Russian privatisation. As Aslund put it:

"Since 1999, something remarkable has happened … The economic recovery of the countries of the former Soviet Union has been spearheaded by large, private corporations that have revived old Soviet energy and metallurgical companies … These corporations are big. The 10 largest private Russian companies have about 200,000 employees each. They were all bought by outsiders, either from the state for a song, or equally cheaply from former private owners, either incompetent state managers or haphazard state officials. The new core owners are few, and because of their concentrated ownership they can undertake badly needed, profound restructuring. As a consequence of the privatization of old Soviet smokestack industries, Russian oil extraction is skyrocketing, and modern metallurgical plants are working at nearly full capacity in both Russia and Ukraine."

The key to capitalism, so Aslund, is to respect property rights, regardless of their origins:

"The U.S. robber barons were more similar to the Russian oligarchs than people realize. Half of them made their fortunes in the railways, and the secret of their success was their acquisition of land from the state for free. Does that not sound like loans for shares? The difference, however, was that the United States had no KGB. When President Theodore Roosevelt challenged John D. Rockefeller, he stopped at antitrust measures, using neither arbitrary punitive taxation (as advocated by Goldman) nor confiscation (seemingly being considered in the Kremlin). Many European properties derive from outright gifts from a monarch, many of them exempt from taxation until recently. Capitalism requires private property, and how it can be established is always a matter of politics. The secret of successful capitalism is to respect property rights regardless of how they originally emerged. The sooner that happens in Russia, the greater its economic growth will be."

April 2010

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