There was some discussion of this guy a while back.
Chris Doss The Russia Journal -----------------
World Press Review www.worldpress.org August 2002 Back from the Abyss Russia's Fragile Recovery Eric Chol, with Alla Chevelkina, L’Express (centrist newsmagazine), Paris, France, May 23, 2002
Spurred by current oil prices, the Russian economy has taken off. The stores are never empty and the oligarchs have turned over a new leaf.
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With 1 million barrels more per day than two years ago, the country has become the number-one producer of crude oil in the world, ranking ahead of Saudi Arabia. This did not fail to have an impact on the tax revenues of the country, which have tripled since 1999. The money from petroleum has made possible the stabilization of public finances and paying down a portion of Russia’s debt.
“The manna from oil revenues has also helped to calm social tensions: The population’s income grew 6 percent last year, after increasing by 9 percent in 2000,” notes Otto Latsis, the deputy editor of the daily Novye Izvestiya. As for Putin, he has benefited from the return to a degree of political stability, managing to get some reforms passed regarding taxes, the justice system, and land privatization.
“In four years, the situation has turned around completely,” asserts William Browder, the head of Hermitage Capital Management. “At that time, the prices for raw materials were at their lowest point; the regime was threatened by political instability; Russia was cut off from foreign financing; a feeling of inertia and pessimism was pervasive. Today, not only is the economic climate more favorable, but on a scale of 1 to 10, the government deserves a grade of 11 for its reforms.” True, the Wild West feel has not totally vanished, and the security companies still have many bright days before them. Similarly, it is still inadvisable for Russian journalists to take too great an interest in certain matters. At the end of April, the editor in chief of a newspaper in the Volga River town of Togliatti, who was looking into a corruption scandal, was found dead in his car, his body riddled with bullets.
Yet, the rule of law is finally emerging. The paradox is to see it taking hold where you least expect it: in the large companies that are in the hands of the Russian oligarchs, the very ones who divvied up among themselves the country’s riches during privatization.
Khodorkovsky is one of them. His 38-year journey, recounted in rich detail by the U.S. journalist David E. Hoffman, is a saga of the Russian oligarchs. [Hoffman’s book The Oligarchs was published this past January by PublicAffairs.—WPR] The former Komsomol (Communist youth) official first became a smuggler, then went on to become a banker, a government adviser, and finally, an industrialist.
The Russian took advantage of his influence to gain control of Yukos’ oil fields for next to nothing ($350 million) during privatization in 1995. By pressuring and threatening the min-ority shareholders and taking advantage of the shady accounting of the time, he imposed his will—sometimes brutally—pushing aside anyone who got in the way.
There was a time when the name Yukos had a sinister ring. Hoffman recounts how Khodorkovsky, after taking over, sent out a force of 300 armed men to take possession of the wells and refineries in Siberia. And how he took advantage of the 1998 crisis to get out of paying his creditors in the West, all the while carefully squirreling away the company’s money in tax havens.
Today, the company headed by Khodorkovsky is not merely extremely wealthy. It has the highest market capitalization in the country ($24.6 billion as of May 17); on revenue of $7.4 billion in 2001, it had $3.7 billion in profits. Still, it has cleaned up its image, thus becoming the country’s model corporation.
This is a revolution that is easily explained. First of all, the arrival of Putin in the Kremlin has reshuffled the cards. Mistrustful of Russian capitalists, the former KGB colonel made himself quite clear. “Shortly after his election in March 2000, he summoned some 50 business leaders to the Kremlin,” recounts Chris Weafer, chief of research at Troika Dialog, a Moscow brokerage firm. “He gave them two years to clean up their act, pay their taxes, and obey the law. In return, he promised that he would not launch any witch hunts.”
Two years later, with the exception of Boris Berezovsky and Vladimir Gusinsky, two billionaires who went into exile, the oligarchs have no regrets. True, they no longer call the shots in the Kremlin, as they did in Yeltsin’s time, but their economic power has been strengthened. “About 20 of them control 40 percent of the gross national product and 90 percent of Russia’s exports,” says Andrei Ryabov, a political researcher at the Carnegie Center in Moscow.
There remains the question of opening up Yukos to foreigners. The group’s main shareholders, Khodorkovsky in particular, have announced that they want to reduce their holdings from 63 to 51 percent. Khodorkovsky, the first to make the transition to transparency, is first in line, of course. Why so much eagerness? Quite simply, the motivations have changed. “Under Yeltsin, the oligarchs were in a race to grab up the country’s assets,” explains Jim Henderson of Renaissance Capital investment bank. “It was a matter of getting the companies to generate as much money as possible as quickly as possible, so their rivals would not end up gobbling everything up. Today, they have time on their side, and they can think about long-term strategies.”
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