#7 - JRL 7253
Argumenty i Fakty
July 16, 2003
DIZZY WITH SUCCESS
Russia: stability under threat
Author: Vyacheslav Kostikov
[from WPS Monitoring Agency, www.wps.ru/e_index.html]

THE ATTACK ON YUKOS HAS SHOWN THAT THE SYSTEM OF INTERACTION BETWEEN BUSINESS AND GOVERNMENT IS FLAWED. AT THE SAME TIME, THERE IS NO UNITY AMONG THE OLIGARCHS, WHO SEEM TO BE AFRAID OF THE AUTHORITIES. BOTH SIDES OUGHT TO LEARN SOME LESSONS FROM THESE EVENTS.

No summer-time political lull has descended on Moscow. The YUKOS company scandal has revealed that the system of interaction between the regime and the oligarchs, which was part of Russia's stability, is flawed. What is all this? An accidental valve failure, a crisis of the oligarchic system - or there is a new force in Russia that is counting on a redistribution of property?

The scandal has shown that the system of oligarchic solidarity has not worked. The "Last Supper" at the headquarters of the Russian Union of Industrialists and Entrepreneurs (RUIE), where "a letter to Putin" was discussed, demonstrated that there is no unity in their camp. Everyone is scared.

However, the Russian oligarchs have serious difficulties about interaction. So far, they have not got common interests linked to national interests. And no one wants to engage in the fight over Mikhail Khodorkovsky's private interests. That is why the letter that the magnates' "trade union," RSPP, addressed to Putin was so smooth. And only after waiting a whole of ten days. The letter was more like a request that "the master should show mercy."

WHO KEPT SILENT, AND WHO REJOICED?

Roman Abramovich (who has enough trouble without YUKOS, since he himself is under attack for having bought the Chelsea football club) and Vladimir Potanin kept silent. Moreover, Potanin even made a public confession that he "did not always do the right thing in the past." Neither Oleg Deripaska, nor Vladimir Bogdanov (Surgutneftegas), nor Vagit Alekperov (LUKoil) went to the barricades. Victor Vekselberg (TNK), who rounds off the list of the top eight magnates, made no comments either. Bold Anatoly Chubais kept silent too. The only one who responded firmly was U.S. Ambassador Alexander Vershbow. He has met with Khodorkovsky twice, demonstratively, in the past few days. And in the meantime, the U.S. embassy has frowned and asked for explanations.

It looks like our oligarchs are afraid of "joining hands in order not to perish one by one." They are afraid of being accused of a plot against the government - since then they would surely be lost.

It is instructive to look at who has spoken up for Khodorkovsky in the government. The first to break the silence was Victor Khristenko. But his voice sounded so indistinct that Mikhail Kasianov himself had to come up to the microphone. It is said that former president Boris Yeltsin earnestly requested Kasianov to do so; Yeltsin is reported to be concerned that the attack on the oligarchs might damage the "Family's" interests.

A PUZZLE FOR THE PRESIDENT

Vladimir Putin has found himself in quite a difficult situation. In the lead-up to elections, he is more and more frequently reminded of a public promise that "the oligarchs will cease to exist as a class." Yet in poverty-embittered Russia that would mean letting the genie of class hatred out of the bottle. Redistributing property is a very dangerous game. Last time, it cast Russia out of the common European channel for almost a whole century. Besides, there is a real danger that the attack by the prosecutor's office on YUKOS could scare all of big business, "exploding stability." But the president values stability highly.

The propaganda power of big business is currently trying to convince the public that oligarchic business groups are "the driving force of the Russian economy and reforms", and that law enforcement and intelligence agencies should be stopped, or they will unbalance the entire system of governance.

Of course, it will be difficult for the president to admit that the agencies are to blame for the failure in the "business-government" system that has worked for three years already. Besides, a retreat under media pressure would mean weakening positions on the eve of the parliamentary and the presidential elections.

WHO IS TO LEARN SOME LESSONS?

Lessons from this conflict, which appears to have already caused serious damage to the image of business in Russia, should be learned by both sides.

The first and fundamental mistake of big business is that it feels more like a partner of the West than a partner of Russia. Besides, unlike the West - and particularly the US, where there are "more than enough" millionaires - in Russia the oligarchs are an "economic minority." Each of them is "under a microscope." All their mistakes immediately become the subject of public criticism.

The second major mistake (the repetition of Vladimir Gusinsky's mistake) is the disproportion of "media attacks" on the Kremlin. Negotiating should continue without hysteria. Besides, the time has come to negotiate not only with the Kremlin, but with the public as well. It should be proved that big business is prepared to take societal interests into account. It should not be sharing tips for publicity, but launching a serious "social contract" with society, on "the division of wealth." No one is demanding that they give away everything, after all. However, as Alexander Livshits said, "one should share."

The third mistake: the oligarchs spend huge amounts to improve their image abroad. It can't be ruled out that this is a contingency plan, in the event that they need to flee Russia, like Boris Berezovsky. Media are already naming potential departures - Abramovich, Nevzlin, Fridman... But what they should do is clean up their reputations in their own country, by way of real charity and domestic investment.

The fourth mistake: in any conflict, our oligarchs immediately rush to complain to their foreign friends. It is finally time to learn to resolve conflicts in one's own country, not knocking at the door of the U.S. ambassador - especially since there is quite a definite view on our oligarchs in the United States. Suffice it to recall the opinion of Forbes magazine editor-in-chief Steve Forbes, that very same guy who publishes rankings of the world's wealthiest people: "In the West, business is successful when it provides services to the population. Meanwhile, in Russia businesspeople have prospered for several years by robbing the government and the population."

"RAMMING" THE OLIGARCHS

The government should also draw some conclusions. There is still too much backstage activity in Russian politics (in party-building, for example); too much private negotiating, including with oligarchs. This alienates the people from the government. So the authorities, in the course of "reinforcing the hierarchy," bring militarized structures too close to themselves. There is still too much secrecy at the very top of the hierarchy of governance.

The people have viewed the fight against police corruption, known as "Operation Werewolves in Uniform", with understanding, as the beginning of purification. No one wants the system of "the agencies" having their ears everywhere to come back. But big business asserts that it is just about redistributing property under the supervision of the militarized structures, hence breaking the stability that was so difficult to achieve.

It looks like "dizziness from success" has struck not only the oligarchs, but the regime as well. So Vladimir Putin had to make a comforting statement about "the inadmissibility of extreme measures" and about "the need to protect the Constitution." However, the closing decision may be quite of a different nature. A number of major economists we surveyed believe that the underlying gist of the operation is to "ram" the natural resources oligarchs. So that they will submit to the introduction of a "mining annuity" in favor of the budget without struggle or loud protests. But this is not only a matter of economics. The president has expressed his discontent with the oligarchs abruptly enough, since they shamelessly interfere with the operation of the Duma through their lobbyists. But that is already major politics.

(Translated by P. Pikhnovsky)