Russia opens tough capitalist frontier

The first law regulating land sales, expected to be signed by Putin this week, draws Communist fire.

A revolutionary wind is blowing across Russia, and through the streets of this ramshackle provincial town near Moscow: Most people are about to become individual landowners - something that has never happened before in Russian history.

But the subject of Russia's new land code, likely to be signed into law this week by President Vladimir Putin, elicits little more than indifference or a cynical snort from most people here.

"What will change?" asks Svetlana Fyodorova, a pensioner about to come into ownership of an 800-square-meter plot near Kolomna, where she has had a dacha and garden for almost 30 years. "The government will just make us pay higher taxes, and probably some businessmen will figure out how to steal our land from us. No one needs this."

Backers insist that the country needs the new code to become a true market economy. But the powerful Communist Party opposes laws that allow land sales.

In Russia, land is a volatile symbol, with the concept of communal ownership deeply rooted in history. In czarist times, most agricultural land belonged to peasant communes. Later, the Soviets saw private property as a hallmark of capitalist greed. Since the Soviet era, all land has been owned - at least in theory - by the state, although lower levels of government, companies and individuals have been granted perpetual rights to use land for specific purposes. But there has never been legislation regulating land sale.

Over the past decade, a shadow-land market has sprung up. Thousands of apartments, dachas, and commercial properties change hands every month - but the transactions have been largely illegal and greased by official corruption.

Now, millions of Russians who formerly had practical possession of the land their home or dacha sits upon will be able to register it as their own personal property. That means they may sell it, or put it up as collateral for a mortgage or loan. But it also means that they will have to declare the real price of the land and pay taxes accordingly.

"This law can launch a construction boom, which will decisively pull our economy out of its stagnation," says Viktor Pleskatchesky, head of the State Duma's property committee. "We are now set to cross the last hurdle to building a real market in this country."

The new code covers only residential and commercial lands. Fearful of a communist-led political backlash, the Kremlin separated agricultural land, forests, and wilderness from its original draft. Over the summer, the Kremlin quietly piloted through parliament a limited code that affects only 2 per cent of Russia's land resources, mainly residential, urban and dacha plots. That means that house dwellers - that's about 20 percent of Kolomna's 150,000 population, for example - will now own the land their home sits on. Russia's many urban apartment residents, who typically keep a dacha or at least a "kitchen garden" in the country, can now own the garden or the land under the dacha.

The Kremlin hopes that its upcoming bills will extend market conditions to the other 98 per cent of Russian lands. "Only private property can ensure that land will be redistributed in favor of the most effective owners," says Anatoly Manillia, deputy director of the Kremlin-linked Center for Political Research. "The lack of private property on land has been the major log jam in all our efforts to attract investment, fight corruption, and build a dynamic market economy."

Supporters say the law may lead to a tidal wave of investment, since rich Russians and foreigners, who will also gain the right to own land, will stop worrying about political instability and start

sinking money into Russian real estate.

With such an incentive, some of the estimated $200 billion in capital flight over the past decade could return, says Andrei Neschadin, executive director of the Expert Institute, an independent Moscow-based think tank. "The expansion of commercial activity, the growth of towns and cities, has long hinged upon this question," he says. "A normal market in land will eventually make us a normal country at last."

But little effort has been made to explain any of this to the population. The corrupt and disorderly privatizations of state enterprises over the past decade have left Russians skeptical and easy prey to Communist claims that another mass robbery of their national heritage is afoot.

"Even in Soviet times, people had lifelong tenure on the land they used for house, garden or dacha," says Yevgeny Kozlov, head of Kolomna's municipal land department. "Naturally, they are suspicious now that changes will only work against them. People remember how a few people became rich through privatization and the rest were impoverished, and they worry."

The Communists, who control almost half of the regional governments and about a third of parliament's seats, say private property will lead to mass dispossession of the poor and could trigger social strife. "Land sales will lead to an announcement of war throughout southern Russia," the country's bastion of conservatism, said Communist leader Gennady Zyuganov after the bill passed through the Duma last month.

Most observers agree that this round was merely a half-hearted rehearsal for the big battle that will come later this year, when the Kremlin plans to introduce a bill allowing the sale of agricultural land. For millions of mainly elderly Russians still trapped on Soviet-era collective farms, sudden changes in property relations could prove disastrous.

"Collective farms are barely functioning, yet they are the sole source of support for a lot of people around here," says Mr. Kozlov. "If the law is not fair, or not properly explained, there could be serious political trouble. People need to be shown decent choices, and given time to make up their minds. We can't rush into any revolutions in the countryside."

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