Business and freedom go together

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Vladimir Putin, delivering Russia's state of the nation speech in the Kremlin's Marble Hall yesterday, appeared to face in two directions at once. On the one hand, he harked back nostalgically to the past, describing the break-up of the Soviet Union as "the greatest geopolitical catastrophe of the 20th century". On the other, he was keen to stress that Russia now looks to the future. The central theme of the speech was the argument that Russia will henceforth be a business-friendly environment.

Vladimir Putin, delivering Russia's state of the nation speech in the Kremlin's Marble Hall yesterday, appeared to face in two directions at once. On the one hand, he harked back nostalgically to the past, describing the break-up of the Soviet Union as "the greatest geopolitical catastrophe of the 20th century". On the other, he was keen to stress that Russia now looks to the future. The central theme of the speech was the argument that Russia will henceforth be a business-friendly environment.

The President claimed that the state will no longer "terrorise business", a clear reference to the fate of Mikhail Khodorkovsky, the former boss of the now defunct oil giant Yukos, whose verdict on charges of fraud and tax evasion is due tomorrow. From now on, said Mr Putin, Russian tax authorities will focus on checking current company tax bills, rather than chasing back-taxes. And all businesses will have to pay only the standard 13 per cent tax rate on hitherto undeclared income.

All of this is intended to encourage wealthy Russians - including the so-called oligarchs - to repatriate the millions they have invested abroad in recent years. It is also an attempt to attract much-needed investment from the rest of the world. But it will take more than a few well-meaning pledges from Mr Putin to convince investors that the regime has changed and there will be no more punitive crackdowns on private business of the type that destroyed Yukos. The primary concern of investors will always be that their assets are safe from political interference. It will not be lost on them that Mr Putin probably targeted Yukos because of Mr Khodorkovsky's political ambitions. While politics and business are seen to be so intertwined, the investment environment will always be precarious.

There were also depressing signs yesterday that Mr Putin has no intention of rolling back his recent authoritarian reforms. His claim that "Russia will decide for itself the pace, terms and conditions of moving towards democracy" was a clear rebuff to those who have criticised repressive measures by the Kremlin, including against the media. And his assertion that "any unlawful methods of struggle for ethnic, religious and other interest contradict the principles of democracy" suggests that he is not about to adopt a more enlightened attitude towards the Chechens or any other group that might try to challenge the Kremlin's authority.

The world should remain suspicious of Mr Putin's government. The Russian President may now be saying some of the right things. But serious questions remain about whether he has the political will - or the authority - to deliver the liberalisation that Russia needs.

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