MOSCOW: At the heart of the pre-election political turmoil which the Yukos affair has stirred in Russia is a simple question — should the state re-examine the shadowy privatization deals on which the post-Soviet economy is built?

Yes, because the deals, during which so-called oligarchs picked up choice assets for rock-bottom prices at questionable auctions, defrauded the state of billions of dollars, proponents say.

No, because no rules of the game were established at the time, and a re-examination would touch nearly all of Russia’s business elite with catastrophic consequences for the economy, opponents argue.

Ahead of a Russia-European Union summit in Rome on Thursday, President Vladimir Putin was adamant that the state would not reexamine the privatization process.

“I am categorically against revisiting privatization results,” Putin said in an interview with Italian journalists published on Tuesday. “In my deep conviction, this will lead to serious negative consequences for the economy and, as a result, for the social sphere.”

The Yukos case culminated last week when prosecutors effectively seized a major stake in the company, Russia’s largest oil giant. Yukos will become the world’s fourth-largest oil and gas producer after it completes a merger with smaller rival Sibneft.

Prosecutors said the freeze on the shares, owned by Yukos chief Mikhail Khodorkovsky and his allies, was necessary as collateral against the billion dollars they accuse the group of misappropriating in the 1990s.

But critics cried foul because, at an estimated 12 billion dollars, the value of the frozen stake far exceeds the sum Khodorkovsky is accused of misappropriating.

Furthermore, the frozen stake belonged to several people, many of whom are not currently under any investigation, they said.

Khodorkovsky was arrested on October 25 at a Siberian airport and flown to Moscow where he was jailed after being charges with fraud, tax evasion and embezzlement.

The case has left domestic and foreign investors wondering if the powerful Russian leader means what he says.

The European Commission said on Tuesday that it would press Russia at the Rome summit for “clarifications” over the Yukos crisis, warning that it could affect talks on bringing Russia into a common economic space.

The spectacle of the government freezing shares in what analysts regard as the nation’s most transparent and best-run company sent shivers down investor spines in Russia, which only 13 years ago was a place where a totalitarian regime controlled all.

“Good morning, Venezuela,” the Vedomosti leading business daily greeted the move. “The threat of nationalization hangs over all Russian business.”

The privatization issue has both political and financial repercussions in Russia.

On the one hand it plays well with voters, many of whom are struggling to make a living and would not mind seeing the state take away assets from a tycoon who is widely thought to have stolen them.

But it also carries a risk — Khodorkovsky’s arrest has evoked widespread condemnation in Russia and brought hints of a joint challenge to Putin’s seemingly unassailable rule.

Putin has repeatedly said that the matter is up to the courts, but that “everyone has to learn to live by the law.”

But therein lies the problem, say critics; if the state back tracks on privatization, Russia’s economy will come crumbling down because most of the industry was divided in the controversial deals.—AFP