- The Washington Times - Monday, April 4, 2005

MOSCOW (AP) — Russia’s slowdown in economic growth continued into 2005, partly the result of the politically charged dismantling of the Yukos oil company, the World Bank said yesterday.

In its 10th periodic report on the state of the Russian economy, the bank noted as positive developments President Vladimir Putin’s backing of legislation aimed at easing tax burdens and at assuaging fears over any new reviews of the questionable privatization deals that plagued Russia in the 1990s.

But the bank also reported that growth in the Russian economy — heavily dependent on oil revenue — had slowed even as the price of oil was breaking records on world commodity markets. Gross domestic product grew by 7.1 percent in 2004, compared with 7.3 percent the previous year.

Low investment in the oil sector in particular held back growth, the report said, due to tougher taxes and continued uncertainty after the government’s nationalization of Yukos’ biggest production unit in December.

“This slowdown appears linked to more rapid increases in production costs than productivity in 2004 as well as to capacity constraints and remaining high uncertainty in relations between government and business,” the report said.

That, as well as a marked escalation in the number of tax probes begun by authorities against other businesses, hampered expansion, the report said.

“The protracted Yukos affair has been the center of attention in this regard, but many other companies have also apparently experienced increased harassment, often from the tax administration under the guise of exposing and collecting unpaid taxes from previous years,” the report said.

Tax authorities collected some $16.9 billion in back taxes in 2004 compared with less than $5.4 billion in 2003, the report said.

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