For nearly two weeks, following a Kremlin meeting between President Vladimir Putin and Russia’s leading businessmen in March, much was made of a so-called “privatization amnesty” offered by the president. Transcripts of that meeting have shown that one relevant sentence from Putin’s speech has been vastly exaggerated and serially misinterpreted by analysts working for Moscow brokerages and the world’s news hacks.

The Russian market has been desperate for some good news ever since its precipitous fall after the arrest of former Yukos owner and CEO Mikhail Khodorkovsky in October 2003. He is currently on trial, where prosecutors have asked the court to jail him and his partners for 10 years on fraud, forgery and tax-evasion charges.

No individual or business has been charged with wrongful privatization in Russia. Some people and organizations have been charged with several economic and financial crimes — ranging from fraud, criminal intent, forgery, theft, building financial pyramids, money laundering to tax evasion — but not for privatization itself. A de-fact privatization amnesty has been in place, and Putin only proposed to look into the possibility of reducing the statute of limitations on prosecuting privatization-deals-related violations from 10 to three years. The proposal, if finally adopted into law, will affect millions of Russians who privatized their dwellings, government employees and labor unions’ leaders who took control of their factories in voucher privatization and subsequent auctions and sell-offs of former Soviet assets in the 1990s.

Limiting the period in which prosecutors can review privatization deals will deprive many legitimate owners of their rights to property that was taken by corrupt bureaucrats and criminals and close the doors on any legal recourse. Weighed against the potential of securing the owners against frivolous cases from corrupt officials attempting property grabs, a time limitation is probably a welcome step. Establishing independent judicial commissions to look into all privatization deals would have been advisable, but a lot of water has flown under the bridge since apartments, voucher and loans-for-shares-privatization deals took place. It is perhaps better to let the sleeping dog of the 1990s lie.

The statute, if limited, will be especially significant in cases where strategic natural resources that had been managed by Soviet ministries were privatized in scandalous loans-for-shares schemes in which treasury money was recycled as loans through private banks of businessmen with corrupt links to government. The de-facto re-nationalization of Yukos has shown that there is enough wrongdoing within privatized companies to use tax claims and other criminal charges to reassert national ownership over them, without revisiting the privatization deals themselves.

The market has been understandably jittery about prospects of re-nationalization. The Kremlin’s firm assertion of control over Gazprom has sent the market into dizzying heights. It is obvious that analysts are manipulating market sentiment in one direction, while investors are inclined to go to another direction. If the Kremlin were a company with listed stock and Eliot Spitzer were the prosecutor general of Russia, almost all analysts working for Russian investment banks would be facing criminal charges. Overstating the potential of a stock, making up news to kick the bull, deliberate misinterpretations and misstatements of facts are all serious crimes in the United States, and prosecutors have shown they are willing to go after bankers and analysts who zigzag the thin line of vested interests.

However, unlike in the United States, corporate reports, projections of earnings, impact of economic data are hardly the driving forces in Russia. The Russian market is resigned to corporate corruption, questionable accounting and auditing practices, indulgent auditors and inside traders. The single most important driving factor in the Russia stock market over the past two years has been the Kremlin’s actions and threats of taking harsher measures against the oligarchs.

Moscow brokerages that call themselves investment banks have been hard hit by increased risk perception the market toward oligarchs, and since most listed Russian companies are oligarch-controlled, bank analysts have attempted to downplay the risk perception to lift the market in which they have been trapped since its precipitous fall a year ago. The aim of these analysts is to show that Putin is a weak president and that the oligarchs could yet take power in Russia, Georgian-Ukrainian-Kyrgyz style. In endorsing the ‘Orange revolution,’ brokerage Renaissance Capital — which held the first investment conference in Kiev after the change of government in Ukraine — seemed to be writing its own wish list for Russia: a revolution that could pull down the Russian government. Meanwhile, investment-bank analysts are hoping that Putin is weakened enough to make concessions to oligarchs and stop investigations into tolling, transfer pricing and other tax-evasion schemes employed by them. It’s a wishful thinking.

Russian business owners run a minimal risk of losing their property in case of revalidation of privatization deals. They are deliberately misstating the issue. The issue has not been private ownership or legality of the privatization itself. The real issue has been tax evasion, fraud and money laundering. In reality, the market should be told to expect more retro tax bills. So far, tax authorities have charged corporations — ranging from oil, tobacco and telecom companies — with tax bills for 2001. There is every reason to believe — and, presidential aide Igor Shuvalov has said so in unequivocal terms — that more tax claims are coming and that government will zealously enforce taxation laws against tax evaders.

Lowering of corporate taxes, social tax burdens, introduction of flat-tax rate for individuals, introduction of fiscal responsibility, end of subsidies and monetization of benefits to pensioners, creation of tax-free zones for hi-tech industry and protection of strategic natural resources from looting by a handful of oligarchs are all good news for the market. Investors have, instead, been hoodwinked into believing that prosecuting criminals is bad for them, and letting them run amuck is good for the market.

Putin does not have to give concessions to criminals to prove he is a pro-business president. There is no doubt that coercion from liberal elements within his Cabinet, incompetence of his economic and finance officials, corruption within the state apparatus, pressure from Western governments, sabotage by oligarchs coupled with terrorist campaigns and mass murders of civilians, relentless criticism from much of foreign media and looming threats of a power grab have weakened Putin.

Investors should seek signs of strength, consistency and uncompromising continuity in Russian political leadership after a decade of chaos and criminality. Investor confidence should be derived from the fact that there is rule of law in the land and it favors entrepreneur and business over bureaucracy. That oligarchs, unlike in 1998, will no longer be able to manipulate national policy to serve their selfish interests. The confidence in Russia should come from a belief that rogues will be prosecuted and economic criminals will be punished in the country. Admissions from the head of state that corruption is a national disease are to be seen as a refreshing, new approach toward real issues and the president’s willingness to deal with them.

Investors should take heart that Putin has not given any assurance of a blanket amnesty to all economic criminals. If he had done so, there would have been no safety for Western investors and lenders from the oligarchs, whose competing business interests would have continued to control the government much as they did for eight years during Boris Yeltsin’s reign. Putin deserves a vote of confidence for protecting investors from oligarchs who have been weakened under his presidency. A return to Yeltsin-era criminality and the control of Russian financial institutions by oligarchs is the worst-case scenario for investors.

The promise of a free market is delivered through sound economic policies, withdrawal of government from spheres of economic activity and in its rigid stand and unflinching ability to take on high crimes. Investors now have a clear choice: either to bet on corporate criminals and their friends in the financial press, or on a president, who favors stability and creation of a civilized-market place, where enforcers really enforce laws and order so that investors can invest and make profits from their investments, without worrying about enforcers working for businessmen fixing the market to rip off the investors.