Back to the Bad Old Days?

This is a partial transcript from Your World with Neil Cavuto, October 28, 2003, that was edited for clarity.

Watch Your World w/Cavuto weekdays at 4 p.m. and 1 a.m. ET.

NEIL CAVUTO, HOST: He was arrested and jailed, his business was seized, and speculation is his political views could be the reason why. Does it sound like the Soviet Union 1983? Try Russia 2003.

Is communism in all its various forms making a big comeback there, particularly the strong-arm view of communism, and should we be worried about here?

Former ambassador to Germany Richard Burt says now. He was an arms-control official under President Reagan and a chief negotiator in the arms- reduction talks with the former Soviet Union.

Retired Major General Don Edwards is not so sure.

Rounding out our panel is Sarah Carey, a board member of this Russian company who says that business executives here are very worried about this.

Sarah, end with you, begin with you. This is scaring a lot of investors beyond just the ones in this Yukos Oil concern. What about you?

SARAH CAREY, YUKOS BOARD MEMBER: It’s a very negative statement about where the economy and the politics are going in Russia.

This action has harmed shareholders in Europe and the United States who own stock in Yukos Oil Company. It’s certainly deterring investors who are adopting a wait-and-see attitude, and it’s stimulating a major capital flight, which is really unfortunate because capital was just returning to Russia.

It’s a momentous time, and it will be determinative what kind of government and country Russia will have, what the next steps are.

CAVUTO: Ambassador Burt, I heard from one investor who said, you know, this is all the proof I needed, Neil; I never trusted these guys with the whole glasnost things and that they were going to be different; they’re still hoods and thugs; nothing has changed. What do you say?

RICHARD BURT, FORMER AMBASSADOR TO GERMANY: Well, Russia today is substantially different from the Soviet era, and, just yesterday, Prime Minister Putin met with a number of Russian and western bankers and made it very clear that he wants to continue his path of economic reform, I mean this is a guy...

CAVUTO: Well, he had a funny way of showing it, Ambassador.

BURT: Well, this is a man who said he wants to double the gross domestic product of Russia for the next 20 years. He’s privatizing Russian agriculture. He supports tax cuts.

But when he came into power, he made a deal with the oligarchs, with people like Khodorkovsky who he’s arrested now and others who’ve made billions of dollars during the last 10 years in Russia, and the deal was very simple. They stay out of politics, and he let’s them continue to grow economically.

And it’s clear that Khodorkovsky, in supporting all of the political parties, including the Communist Party, in opposing Putin’s re-election and the upcoming Duma elections in December, crossed for Putin a very important red line, and I...

CAVUTO: All right. We should say Khodorkovsky is the Yukos chief, the man who’s been arrested.

BURT: Right.

CAVUTO: But, I’ll raise this to you, General Edwards, when Gorbachev and Ronald Reagan were meeting and there was this great idea that Russia was moving forward, you know, getting rid of some of the sort of the mob influences that were very much part of the system then, many argue still the system now -- maybe even whether this arrest was justified -- we really don’t know at this point -- did this set us back as far as relations are concerned?

RET. U.S. ARMY MAJ. GEN. DON EDWARDS: Oh, I think it set us back. I don’t think there’s any question, and there’s been a concern right along that Putin is surrounded by his old allies from the KGB, they’re still there, and, when the chief of staff resigned from his administration who was regarded as a champion of the business interests, I think, Neil, it’s a very clear signal that we’re slipping back.

Hopefully, there will be enough pressure on Putin to turn this around, but the signals now are not good.

CAVUTO: Sarah, I’ve got to wonder, too. If you’re a U.S. investor, again apart from the oil interest, but you’re looking to link up with a Russian concern, are you going to think twice now -- again, whether or not it’s justified, this arrest?

CAREY: I think the answer is a resounding yes because it throws into question all the progress that was supposedly made in the rule of law, that what the Putin administration has done is to totally distort the criminal-justice system and to use it in Soviet-style methods, where, you know, witnesses are hauled out of jails to make up stories, regional procurators are told to go find a case on Yukos, lawyers are kept out of hearings, hearings are closed.

I mean this is what’s been going on now since July, and they’re just running roughshod over their own criminal-justice rules and regulations, to say nothing of international standards. So I think for an investor who’s thinking about, you know, putting big money into Russia, it raises very serious concerns.

CAVUTO: Ambassador, meanwhile, you’re saying we should all calm down, right?

BURT: Yes, I think we’re being naive. We talk about running roughshod over the rule of law. But anybody who’s following events in modern Russia knows that the rule of law has only been put in place very gradually, and they have great progress to make. What Putin has brought is a certain amount of stability to allow the reforms to continue.

CAVUTO: All right.

BURT: It doesn’t mean we shouldn’t be very vocal about his violation of laws and we shouldn’t try to push towards greater democratization, but I think we have to realize that this is a work in progress, and Russia’s stock market last year was the best performing stock market in the world.

CAVUTO: It’s fallen 20 percent in the last week, Ambassador, but we’ll see what happens.

Ambassador Burt, thank you.

General Edwards, thank you.

Sarah Carey, thank you.

Appreciate it.

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