Gosh, the holidays can really put one on an emotional roller coaster. Put another way, what a way to start the new year! Just ask VimpelCom, Russia’s No. 2 mobile-phone operator.
In early December, Russian tax troops notified VimpelCom-known on the street as BeeLine-it owed $157 million in back taxes for 2001. It’s not hard to imagine what had to be going through the minds of VimpelCom executives at that point. They were thinking Mikhail Khodorkovsky, one time head of oil giant Yukos. Khodorkovsky now finds himself behind bars for, among other reasons, being a poster child of a powerful, well-heeled Russian oligarchy that has evolved since the Soviet Union crumbled in 1991. Russian President Vladimir Putin apparently does not want to deal with the Khodorkovskys of his fine land anymore. It seems VimpelCom is owned in large part by the Alfa Group, which also happens to having a major stake in oil company TNK.
On Dec. 30, Russian tax officials said oops, they screwed up, and VimpelCom really owed only $17.6 million. OK, let’s not point any fingers. There’s no need to get preachy. Accountants here in America-government and private sector alike-have been known to make mathematical mistakes from time to time.
Alexander Izosimov, chief executive officer of VimpelCom, had this reaction: “We are grateful for the active role of several senior government officials, including officials who are very knowledgeable of the Russian tax code. The overall process between the tax authorities and ourselves was constructive.” I bet.
One thing’s for sure. It was a great buying opportunity for somebody. VimpelCom’s stock shot up on the news the Kremlin had relaxed the wireless carrier’s tax burden and that the company was, in fact, still a going concern!
Of course, the kicker is this: Doing business in Russia could get a more difficult and scary for U.S. wireless firms, which had considered the country a land of opportunity.
Putin is concentrating political power and doing a fine job helping the news media be quietly obedient. Russia’s great experiment in capitalism appears to be taking a dangerous turn. Things begin to look a little fishy when a powerful industrialist is jailed, when a prominent journalist is murdered and when a political candidate unaligned with the Kremlin suddenly finds himself poisoned on the eve of a big election.
“Russia will undoubtedly survive the flawed process of privatization, just as it has survived more serious crises. But the direction Putin is taking is disappointing,” writes Marshall Goldman, a Russian scholar at Harvard, in the November/December issue of Foreign Affairs. Goldman said Putin’s increased meddling in economic matters is especially troubling. “It means that, under Putin, Russia is reversing some of the most important economic and political reforms it adopted after freeing itself from the yoke of communism,” he said.
It’s not clear whether after a meeting or two you can look into a man’s eyes and get a sense of his soul. Putin claims to be every bit a fighter of terrorism as President Bush, earning him points at the White House. The only difference is this cowboy cuts corporate taxes.
