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#8 - JRL 7258
Financial Times (UK)
July 21, 2003
Divide and rule: The Kremlin is fighting the oligarchs, again

By adding murder allegations to its investigation of Yukos, the Kremlin has dramatically raised the stakes in its conflict with the country's flagship oil company. The charitable explanation of this move is that President Vladimir Putin is seeking to strengthen the rule of law in his nation's fragile market democracy. As justifications go, it is a good one. The lack of clear rules, even-handedly enforced by an independent judiciary, is the single biggest lacuna in the country's still incomplete civil society.

Unfortunately, enforcing the law is not the only - and probably not the chief - goal of the state's campaign against Yukos. No one knows for certain what Mikhail Khodorkovsky, Yukos's chief, has done to bring down the wrath of the Kremlin. It could be his funding of opposition MPs; it may be his open quarrel with the state's oil pipeline monopolist; or it may simply be that Mr Khodorkovsky, ranked the 26th richest man in the world by Forbes, has become too powerful. What is certain, however, is that Mr Khodorkovsky and Yukos are being punished for getting in the government's way today, rather than for their allegedly corrupt, and possibly blood-tainted, behaviour in the 1990s, when the offences supposedly took place.

Mr Putin has been down this path twice before. Shortly after taking office, he used the law as a cudgel to force Vladimir Gusinsky and Boris Berezovsky, two of Russia's most powerful oligarchs, into exile. At the time, many applauded. After all, one of the greatest weaknesses of Boris Yeltsin's reign was the extent to which he fell under the sway of the oligarchs, a handful of businessmen who were granted control of the lion's share of Russia's assets. Neutralising the two most politically aggressive seemed to bring a welcome shift of power back to the man who had been elected president.

The attack against Yukos has highlighted the dangers of this tactic. No Russian business of any size emerged out of the chaos of the 1990s without having broken at least a few laws. Sadly, the murky histories of Russia's businessmen appear to suit its government rather well. In a country that has not yet fully absorbed the notion of a loyal opposition, the Kremlin is finding it worryingly convenient to be able to curb any unruly baron by looking into the misdeeds of his past.

At the root of the problem is Russia's flawed privatisation process. Because the division of the spoils was so chaotic - and so profoundly unjust - Russia's rulers will always have a powerful weapon to use against its capitalists. Ultimately, there are only two ways to end this stand-off: grant an official amnesty, at least for the oligarchs' economic crimes, or take their property away. It is a choice between accepting gross inequality and imposing yet another destabilising revolution. Neither option is appealing. But, having tried the latter in 1917, Russia might find it safer this time to find a way to live with its unsavoury oligarchs.

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