Putin: Business must return from "offshore shadows"

By Anastasia Lyrchikova

CHEREMUSHKI, Russia Dec 19 (Reuters) - Prime Minister Vladimir Putin on Monday decried the illicit use of offshore structures by Russian state businesses to spirit cash out of the country and ordered them to return from the "offshore shadows".

The comments by Putin, who has launched a bid to return to the Kremlin next March, mark his clearest indication to date of concern that accelerating capital flight is being partly driven by corrupt schemes run by managers at state businesses.

Net capital outflows totalled $74 billion in the first 11 months of the year, central bank data show, and are running at their fastest rate since the 2008-09 financial crisis.

"It's time to put an end to the offshore legacy of the era of wild privatisations," Putin said, referring to the state selloffs of the 1990s that created instant fortunes for Russia's business 'oligarchs' who shifted their wealth abroad.

The wide-ranging nature of Putin's comments is likely to raise concern among publicly traded firms in sectors such as metals and mining, telecommunications, power, real estate development and retail that are owned via offshore structures.

Since Putin first became president in 2000, the government has pressed companies to return to Russia, suspecting them of using their offshore status to minimise their tax exposure.

The companies counter that they prefer to base themselves offshore because they cannot get adequate redress in the Russian courts and consider the protection of property rights at home to be inadequate.

As a result, some 55 percent of accumulated foreign direct investment into Russia comes from companies registered in Cyprus or the Netherlands - some $70 billion in total. Most of that is believed to be money of Russian origin.