#15 - JRL 7252
July 17, 2003
Yukos Treated as a Traitor
By Pavel Felgenhauer
Yukos CEO Mikhail Khodorkovsky, officially Russia's richest man, has been financing opposition parties and has expressed ambitions to leave business in 2007, which has been read as an intention to enter politics and perhaps one day run for president.
So the Kremlin decided to curtail Khodorkovsky's ambitions by arresting his long-time associate Platon Lebedev and searching Yukos offices.
Many in Moscow believe the situation will be resolved somehow, that Khodorkovsky will strike some deal with the Kremlin and downgrade his political ambitions in return for Lebedev's release from the dungeon.
The alternative scenario -- a continued legal assault that could dismantle Yukos -- is seen as too dangerous. This would send the wrong signal to potential foreign investors, lead to increased capital flight and destroy President Putin's stated strategic aim of building a "competitive" market economy. Putin has been warned of the possible consequences, but the assault on Yukos continues. Apparently the aim is not simply to scare Khodorkovsky out of politics.
Actually, all of the oligarchs meddle in politics, all give money to political parties, all actively lobby the government and parliament. Unified Energy Systems CEO Anatoly Chubais is one of the leaders of the Union of Right Forces -- a party that recently has been loudly criticizing the authorities on military reform, Chechnya and so on. But still Chubais seems to continue to enjoy cordial relations with Putin.
There is one feature, however, that makes Khodorkovsky a special case: He spends money promoting pro-Western ideas and advocates closer relations with the United States. During the run-up to the war in Iraq, Khodorkovsky stated that "Russia's economic interests in Iraq are close to zero" and it is better to support the U.S.-led coalition.
While Khodorkovsky was promoting a pro-U.S. stand, the Russian intelligence community, led by the FSB, was pressing Putin to support Saddam Hussein. I was told that one Russian government-owned oil company that, unlike Yukos, did make money in Hussein's Iraq bankrolled this lobbying effort.
Lebedev is being held in Lefortovo prison, which belonged to the KGB in Soviet times and is now run by the FSB. This institution is specifically reserved for people accused of terrorism, spying, treason and other political crimes. A businessman accused of theft is not sent to Lefortovo without a cause.
Lebedev's lawyers complain that they are denied access to their client -- again a feature more reminiscent of a treason or spy case. Putin is a former KGB officer and a former director of the FSB. It has been reported that his Kremlin associates from the FSB and the FSB itself are behind the attack on Yukos. This campaign may be partially motivated by personal greed, but it also may be aimed at eliminating a powerful company that is presumed to be an agent of foreign influence.
The nature of the all-out assault seems to indicate that its true objective is to destroy Yukos and seize its oil wealth. At least in a number of previous such "legal" assaults on big business during Putin's presidency, confiscation of assets was the end result (the Sibur gas company, the business empires of Boris Berezovsky and Vladimir Gusinsky).
It was often stated during previous Kremlin-led attacks on oligarchs that heavy-handed confiscation of assets accumulated through shady privatization deals would destroy business confidence and rupture relations with the West.
But nothing of the sort has happened: The economy is growing, and Putin is still the West's darling. At the same time, a destruction of Khodorkovsky's empire would be very popular inside Russia, especially within the middle ranks of the military and security services, where almost all believe "the rich Jews" have stolen Russia's wealth, destroyed its military might and sold it out to the West. Disgruntled officers may again (as in 2000) see Putin as a possible redeemer of Russia.
Western oil majors will not stop seeking opportunities to invest. Multinationals that are pumping oil in Nigeria, Venezuela and the Congo will hardly shy away from Putin's Russia. The immediate economic effects of Yukos' possible dismantling will also be not serious: While the price of oil is well over $20 per barrel, even a nontransparent chekist-run oil company can earn a profit.
Of course, a chekist-run Russia will never truly integrate into the West. But who said the chekisti want that to happen?
Pavel Felgenhauer is an independent defense analyst.