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'Nationalization of Elites’ process gains momentum in Russia

March 26, 2014, 17:51 UTC+3 Alexandrova Lyudmila
Basketball players Paul Pierce (L), Kevin Garnett (2nd R), and Jason Terry (R) talk with Nets owner Mikhail Prokhorov (2nd L)

Basketball players Paul Pierce (L), Kevin Garnett (2nd R), and Jason Terry (R) talk with Nets owner Mikhail Prokhorov (2nd L)


MOSCOW, March 26. /ITAR-TASS/. NBA’s Brooklyn Nets is likely to become a Russian basketball club as its owner Mikhail Prokhorov repeatedly stated his intention of transferring the club’s assets under the Russian jurisdiction. By doing this, Russian billionaire and former presidential candidate Prokhorov has a chance of evading possible sanctions on behalf of the United States.

“This is what we call ‘The Nationalization of the Elites,’” the tycoon said. “I have repeatedly stated that step by step I am transferring the club under the Russian jurisdiction.”

According to the billionaire, his intended move does not contradict NBA’s regulations and once Brooklyn’s assets are under the Russian jurisdiction all of the club’s profits would add up to the Russian budget.

The 48-year-old billionaire bought the then New Jersey Nets in 2010 for $200 million and later relocated the club to Brooklyn, which has a large Russian population.

All existing and possible sanctions from the West against Russia, its companies and state officials boosted the so-called ‘Nationalization of the Elites’ process in the country. The process was initiated by the country’s authorities last year after the introduction of western sanctions under the so-called “Magnitsky List.” Russian authorities currently ponder a bill to ban state officials of all levels from owning property abroad, to retreat their offshore businesses and ride domestically manufactured cars.

The bill was initially submitted with the Russian parliament’s lower house, the State Duma, in the summer of 2012, but was later retracted for further additions and considerations. Yevgeny Fyodorov, the author of the bill and a member of the ruling United Russia party, recently called on the Duma’s committee dealing with the draft law to speed up the consideration of the document.

In an interview with Izvestia daily, Fyodorov said that state officials possessing assets abroad, particularly real estate, are vulnerable to pressure from the West and thus jeopardizing the national security.

“The bill was submitted to exclude any chances of manipulation,” he told the daily.

A source in the Russian presidential administration told Izvestia daily, that owning a property abroad is a very strong grip on a Russian state official and it may influence his political decision-making.

Kirill Kabanov, the chairman of the Russian National Anticorruption Committee, said the mooted bill fully complied with the current situation in the country.

“When one plants his roots abroad, he begins thinking in a foreign way, ponders how to maintain his foreign property, mulls foreign education for his children and makes plans for his retirement abroad. As a result, it is often to the detriment of the state and society,” he said.

Plans to ban Russian state officials from owning a property abroad first emerged in the summer of 2012, when the United States introduced sanctions against a number of Russian officials for being allegedly involved in the death of Sergei Magnitsky and included them in the so-called ‘The Magnitsky List.’

Magnitsky, a lawyer of the Hermitage Capital Management investment fund was charged in Russia with assisting in tax evasion. He died at the intensive care unit of Moscow’s Matrosskaya Tishina prison on November 16, 2009, eleven months after he was taken into custody and seven days after he was indicted. The West accused Russia for failing to provide proper medical assistance to Magnitsky, while he was in custody.

Almost half a year after the introduction of the Magnitsky List, Russian President Vladimir Putin kick-started the so-called ‘Nationalization of the Elites.’ In February of 2013 he submitted with the State Duma a draft law banning all Russian state officials from having money and securities on foreign bank accounts. The bill also carried a provision banning officials from owning property abroad, but after some parliamentary debates the ban was interchanged with the obligation to declare foreign real estate.

At that time Russian media outlets exploded with reports about undeclared foreign property of state officials.

Last October, Sergei Ivanov, the head of the Kremlin staff, said that some 1,600 state and municipal officials in Russia have foreign assets and about 1,000 own property abroad.

The Kremlin hinted state officials it was time for them to say good bye to their foreign property about a year ago. According to the Kremlin, foreign property helps West to keep a state official on a hook. Russian Presidential Press Secretary Dmitry Peskov said in April of 2013 that “a state official must not have property abroad.”

Bills, which are currently drafted by the Finance Ministry and aimed to retract the Russian economy from offshores, also comply with the ‘Nationalization of the Elites’ tasks. One of the bills stipulates that legal as well as personal entities having a share of even only one percent in offshore businesses must declare their income and pay taxes.

Moskovskaya Pravda daily quoted Sergei Ryabukhin, the head of the Federation Council’s Committee on Budget and Financial Markets, as saying that “42 percent of financial operations in Russia’s foreign trade are registered through offshore zones and this figure amounts to some 10 trillion rubles.”

“Over 170,000 Russian companies are registered in Cyprus,” Ryabukhin said.

Meanwhile, the Russian Trade and Industry Ministry submitted a bill with the government restricting state acquisitions of foreign cars for state officials. The move is aimed at supporting the domestic automobile industry. However, all foreign brands of cars assembled in Russia will be considered as Russian cars.


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