The European Commissioner responsible for enlargement affairs, Mr Guenter Verheugen, has on a number of occasions in recent days urged applicant states from central and eastern Europe to break all links between the old communist nomenklatura and new economic structures. At first sight, the strictures he wishes to impose on the applicants may appear to stem from political dogmatism but there is more to it than that. In the past week in Russia, where the Communist nomenklatura remained in power under a different name, there have been further revelations and allegations of graft and corruption. Claims that a $4.8 billion loan from the International Monetary Fund was diverted for purposes other than those for which it was intended are to be brought to the attention of the prosecutor general following investigations by Swiss magistrates.
The diversion of funds, according to initial reports, took place on August 14th 1998. Three days later Russia's economy collapsed, banks went into liquidation and the value of the national currency fell to a record low. Russia's road to the market economy was determined by old, and in many cases not so old, members of the nomenklatura. They availed of the financial expertise and connections built up during the Soviet era to take control of the new economy. The privatisation of large state companies, particularly those concerned with natural resources, took place against a background of cronyism through which the country's wealth devolved upon a small number of so-called "oligarchs" who became involved in constant trade-offs of money for political advantage and political clout for financial gain.
President Putin promised in the course of his election campaign that he would deal with the oligarchy. His meeting with senior businessmen last Friday ended in a commitment that the state would not overturn the results of the highly-criticised privatisation programme introduced in the early 1990s by the deputy prime minister, Mr Anatoly Chubais. What he was telling the oligarchs was that while their money was safe their era as the chief manipulators of Russian politics was ending.
There were, however, some notable absentees at the Kremlin meeting. Mr Boris Berezovsky who with President Yeltsin's daughter, Ms Tatyana Dyachenko, heads one of the most influential groups within the Kremlin was not invited. Neither was Mr Roman Abramovich, the oil billionaire, who is one of Mr Berezovsky's close associates. Mr Vladimir Gusinsky, whose media empire opposes the Putin administration, was in Spain having survived the almost undivided attention of the tax police and a week in the prison without trial. The prime minister, Mr Mikhail Kasyanov, has been accused of involvement in the alleged diversion of IMF funds.
Mr Putin had little option but to let the results of the Chubais privatisation stand. To undo all that has been done would have been virtually impossible. The wealth of the oligarchs will, therefore, remain regardless of its provenance and Mr Putin will attempt to keep Russia on the road to financial recovery. If it is only to avoid the repetition of the Russian experience, Mr Verheugen's diktat to the EU applicant states is both justified and timely.