Friday, August 25, 2006

[russia] putin was right to imprison khodorkovsky

You could be forgiven for looking at the smartly attired, well groomed Mikhail Borisovich Khodorkovsky and thinking butter wouldn’t melt in his mouth. In fact, there is ample evidence that he had plans to establish a parliamentary republic in Russia and who could possibly be the leader of that republic?

President Putin accused Khodorkovsky of accumulating enormous amounts of oil reserves and yet not contributing to the state, through the vehicle of taxation. Of course this was par for the course with such oligarchs, as long as they were onside with the administration.

In other words - onside with the stable governance of Russia. Because, whatever your personal opinion, Putin and the Duma are the state.

But Mikhail Borisovich was a driven man. Or rather, he’d had the sniff of power and threatened to take Russia back to the lawlessness of Berezovsky and Co. It was basically the clash of two gung ho ideological movements – on the one hand the soon to be One Russia, with the backing of the state and the stability many hankered for and on the other - Open Russia, with Khodorkovsky.

It is hotly disputed that Putin’s government itself was hankered for but stability – yes, yes that was. The average Russian I’ve spoken with says Russia needed stability in the public sphere after the crazy early nineties and the bust of the late nineties. The dollar, the euro – these needed protection. The stabilization fund was an essential, however it was administered.

In an embryonic democracy such as Russia, it was necessary to step carefully, whilst not denying the people the new found freedom to accumulate wealth at grass roots level. In other words, a middle class was rising to which almost all aspired. Credit would facilitate this in the next few years.

On the one hand, yes, freedoms have been eroded and memories of pre-1990 still haven’t faded and in the case of the babushki and dyedushki, the grandparents, those days are actually celebrated, not least over the recent pensions issue. Putin found to his cost that he needed to tread carefully, slowly, step by step, laying out his platform and working inexorably towards it.

The people are terribly anxious, more or less all the time and they don’t understand. That’s when they revert to old stereotypes and old modes of behaviour, particularly the hoarding instinct.

Vladimir Perekrest says that back in 2003, Khordokovsky, seen by many as an antidote to the seeming backsliding to repression and a heavily influenced press, came to be seen in many quarters as synonomous with democracyand as some sort of saviour [although inate cynicism tempered this].

Poor Russia, if this is what they’d hoped for.

The same April, when Putin had his famous meeting with Khodorkovsky, an "analysis of constitutional law problems of state building and improvement of the constitutional legislation of the Russian Federation" was published, ordered by the Foundation for the Development of Parliamentarism, but as was found out later, the report was in fact ordered by "Open Russia", according to Perekrest.

The game plan appeared to be the old one of gaining control of the Duma, putting in place legislation which ensured an ‘independent’ prime minister and effectively creating a power separation. That was the first step, accompanied by all the usual promises of payback – the numbers game.

The real purpose was, of course, to marginalize the President and vest the legislative, if not the executive power, in the hands of the parliament, i.e. the prime minister.

The Open Economy Institute, coincidentally and around the same time, produced an analysis which proved, in its eyes, that the economy usually grows faster in countries with a strong parliamentary government. This institute had at least geographical ties to Yukos.

These were the days of ‘chutzpah’, of daring forays into constitutional change, under the nose of the administration. It was the challenge of the nouveau riche and because it seemed an alternative to state control, it was widely popular. It was an attempt at Russia plc. It was an attempt to do a better job than Yabloko had done.

In May 2003, the Council of National Strategy, also composed of eminent politicos, gave out a counter-report: "Oligarch revolution in preparation in Russia".

Essentially, it spoke the truth.

The oligarch class in Russia, from the earliest days, not unlike the robber barons around the time of the Magna Charta, has never been a benign ‘upper class’, so to speak. The oligarchs have always acted from financial self-interest and never from the point of view of the greatest good. Well, who ever has? But with the Russian model, there is a distinct edge to the business. Don’t forget Rasputin’s grisly end.

This model which, for want of another, they always fall back on makes for a class of ruthlessly self-interested hoarders, with muscle to get their way. Thus, all rules are made to be either broken or negotiated around, they brook no opposition to their activities and they are driven men. It’s a dangerous game but the stakes are high and the top dog changes periodically.

You have to understand the fear factor in Russia. One goes to buy, say, a particular jacket and sees a rather nice pair of trousers but decides to come back in a few days. It won’t be there. Here today, gone tomorrow and you’d better get it while the going is good. In many ways Russians are optimists – they always feel they’ll still be alive and kicking ten years down the track but not financially.

As a consequence of the oligarchic model, the economy is always going to be transitory and fundamentally unstable. And one of the root causes of the instability is the attitude of the average Russian. One couple I knew in my early days over here decided to tell me a joke.

The transport drivers needed a vehicle and so they were given the Kamaz and then the farmers said, ‘We need a vehicle as well,’ and so they were given the Lada.

I have a Lada. Everyone asks me why, when to sport a foreign ‘importni’ car or ‘inamarka’ is the sign of social elevation, I drive around in a Russian tank? I think everyone should buy Russian and in roubles. I have no dollars and no euros. Only roubles.

To a man, the Russians wryly smile and applaud my patriotic foolishness.

According to Perekrest, perhaps Khodorkovsky was initially advised not to enter politics but over time, that changed. People surrounding him started to say that the calibre of an oil company, even the largest, was too small for MBK. Only the post of prime minister is the post in which he can show his "eminent abilities of administrator and strategist".

Perekrest believes that in 2001-2003, the idea of pushing Khodorkovsky ahead to power began to be considered as realistic and as the first step toward the qualitative new possibilities of influence, not only in the oil business, but also for the entire economy.

Meanwhile, Putin was fighting on several fronts - the Iraqi war and the USA, NATO, WTO and IMF coolness, the general coolness of Europe. If you look at the photographs of the D Day remembrance, Putin was not engaged in conversation with any Anglo-Saxon or European except Chirac and that for France’s own reasons. There was the delicate matter of the Club of Paris and CFR to consider as well.

Into this came the spectre of Khodorkovsky and Putin had to deal with this summarily. Just think it out yourself and you’d see that it was an intolerable situation for the country and never, ever forget that Putin was and is the country.

All the preceding caused angst in Russia and it was clear for any who would see that Putin had to have a dedicated, loyal, vertical chain of command on whom he could rely. However, the main money spinner for the nation, energy, was private. Not only that but largely in the hands of Khodorkovsky and a handful of others.

Perekrest says that suddenly, the Yukos/Sibneft union was consummated and Khodorkovsky became the head. American oil companies now entered the picture in a much bigger way. Exon-Mobil declared its intention of acquiring either 40 percent, or the control block of the united company.

There is one more story about Khodorkovsky connected with America.

Stanislav Belkovski, a political analyst, said that according to reliable sources, during a meeting with Condoleezza Rice, it was said that in the next political cycle of Russia, Khodorkovsky and Nevzlin would have key positions in order to move towards nuclear disarmament.

Quite a key issue, isn’t it? For if it was indeed as reported, then it is tantamount to treason and under the rules of the political game in Russia, Khordokovsky is mighty lucky to even be in one piece today, relatively speaking.

Khodorkovsky always maintained that forces were planning to take his company and one name pops up - Roman Abramovich. Personally, I believe one has rocks in the head to even think of taking on the siloviki. Now the expat Bukovsky has much to say about the siloviki but I ask the question, ‘Would you prefer the OGPU or the Cheka?’

That was not the main point. The main point was that whether it was the truth or not, Khordokovsky was regarded as colluding with western business, with the Bush administration behind them, to enter Russian soil and access Russian markets, not so much as partners but in their own right. So again, say what you will about the siloviki but such an idea as allowing Americans to strut around the sovereign territory was quite clearly anathema to even the average Russian.

Basically, no one stood up for Khodorkovsky when the heat was really applied and he found himself adrift and friendless, a situation which very much reminds me of the way Lord Archer was abandoned.

So, the Federal Service of Prison Administration is now entertaining Mikhail Khodorkovsky, at the county’s pleasure, in the closed Chita region and reports indicate that Khodorkovsky has been out of line and behaving very badly. This, of course, means remission of parole. Under the current political climate, there is no way back for this man.

Vladimir Putin was at some pains to explain that the Khordokovsky business was a one-off, that the man was quite clearly out of line and that as far as Russia’s relations with other countries were concerned, it was strictly business as usual. Unfortunately, he misread the west, which has never forgotten Newsweek’s extremely damaging September 7th, 1998 story of Yevgeni Polyetski.

No Russian I’ve spoken with does anything more than shrug his shoulders about this tale and yet it sent waves around the world at the time:

The country's frantic privatization created a class of politically connected bankers and businessmen who got rich buying assets on the cheap; Boris Berezovsky, who played a key behind the scenes role in ousting Kiriyenko, is the most famous. These so-called oligarchs effectively paid for Yeltsin's election campaign in 1996.

After that, secure in the knowledge that private property was going to be respected, they insisted they would prove their talents as legitimate businessmen: investing in the companies they had acquired, lending money to deserving businesses, creating jobs.

With some exceptions, that never happened. But Yevgeny Poletsky, for one, made the mistake of believing them. Poletsky owned a fleet of fishing vessels in Astrakhan, in southern Russia. Seeking to expand in 1996, he went to one of the largest Moscow-based banks looking for a loan.

He eventually had a meeting with the bank's president, after which, he says, he was escorted into a private room by two of the executive's security guards. Poletsky says the two men then told him that, even though the bank had not yet agreed to the loan, the fishing fleet was now the property of the bank.

"Then they made it clear that if I tried to protest, I would-get hurt." Poletsky says.

Such hardball tactics have persuaded potential foreign investors to steer clear of Russia. And the oligarchs remain unreformed. Once Kiriyenko announced that the ruble would be devalued on Aug. 17, the Central Bank knew that banks would be in deep trouble. It then funneled a series of soft loans to some of those owned by the politically connected oligarchs. They converted the rubles into dollars and shipped the money offshore, fueling the run on the currency.
The West can be under no illusions.

That was 1998 and this is 2006 and yet old fears run deep. Effectively, what Putin has done is to wed Russia irrevocably to the world economy, play the game responsibly e.g. the paying off of the Club of Paris debt in full, the Fitch and Moody’s upgradings and so on. He knows the pitfalls full well.

In my own republic here, the wealth can be seen everywhere and whereas people were formerly counting kopeks, now they’re laying 1000 rouble notes on the counter. Perhaps everyone, each in his own small way, wishes to be a mini-oligarch. If the sign of affluence and prestige is the motorcar, then this capital city has that in abundance.

There is no sign of a red jacket and gold chain anywhere these days. Those who have, they shop in Europe and those who have less, pretend they’re doing so. This is one of the reasons Putin was returned in a landslide and with control of the Duma.

Detractors were quick to point out that the civil service ‘instructed ‘ people to vote for Yedinaya Rossiya or else and that corruption was rife. I can only answer that with my own experiences at the time.

On the day of the poll, I got up late and wandered over to the school where the polling station was. Firstly, there were no ‘how-to-vote’ cards, no rosette-sporting party faithful. There was a big board [unguarded] in the main foyer and I watched an old couple scrutinizing the details of each and every candidate and talking earnestly between themselves.

I went up to the big board and there the candidates had all set out their stall, so to speak, complete with which party they represented or which faction group; all legal and above board. Naturally, as a foreign national, I wasn’t allowed into the polling room but I could see through the door and what I saw was eye-opening.

You remember the old one about the dog which did not bark – that was the surprising thing? That was the situation here. There were the ballot boxes, manned by the electoral commission; there were the booths with their curtains and no hidden cameras, there were the ballot papers which many did not understand, as in the west.

The whole business was conducted not unlike any election I’ve ever voted in. So where are these allegations of impropriety? From whom do they come? From the west and from the opposition parties. That’s all.

Look, I don’t say Putin is a saint. I do say he has the pulse of the nation [with the exception of the pensioners where he went in with customary Russian overkill and I have a long history of being on the side of the pensioners] and he realizes that Russia is a special case. Russia will never have any negotiating power in foreign forums unless it first builds up an unassailable and stable economic base.

No one is suggesting this can be done in two electoral terms. And yet that is what Putin is grappling with. To decry the siloviki is to misunderstand the whole post-Stalin history of Russia. Probably most things are true, which have been said. And yet which country does not have such?

And yet these eyes have seen an amazing turnaround, there is money in the pocket and butter in the refrigerator and more in the shop when that’s finished and now the big question remains, ‘Who will succeed Vladimir Putin?’

Khodorkovsky?

James Higham, August 25th, 2006

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