[lbo-talk] Oligarchs cry uncle as Putin cracks down

Chris Doss itschris13 at hotmail.com
Tue Aug 5 06:40:58 PDT 2003


Toronto Star August 5, 2003 Oligarchs cry uncle as Putin cracks down By Stephen Handelman

Imagine living in a country where the rich offer to pay more taxes.

Wishful thinking? Not in Russia, at least, where the head of the country's most powerful business group suggested just that last week. He also volunteered, on behalf of his billionaire members, to pour more money into the Kremlin's favourite charities.

The unexpected benevolence of Arkady Volsky, who runs Russia's Union of Industrialists and Entrepreneurs, contained, however, an unmistakable whiff of self-interest.

For the past six weeks, Russia has been in turmoil over a government crackdown on leading industrialists, including Mikhail Khodorkovsky, the oil tycoon who is considered the country's richest man.

There was little doubt the offer was intended to appease the powers that be, and perhaps head off more drastic moves.

The crisis started June 21 with the Moscow arrest of a minor official in Yukos, Khodorkovsky's oil firm, on charges related to embezzlement and murder.

Then, on July 2, Platon Lebedev, a key Yukos shareholder, was hauled away from hospital in handcuffs and charged with fraud related to a murky 1993 buyout of a state fertilizer firm.

It was soon Khodorkovsky's turn. After the 39-year-old tycoon was brought in for questioning (he wasn't charged with anything), Moscow's conspiracy spinners went into overtime.

They painted the affair as a struggle between the country's modernizing pro-Western business leaders and the evil, old-thinking forces inside President Vladimir Putin's increasingly authoritarian government.

"Today they come for Yukos," worried one Russian businessman. "Tomorrow they will come for us."

It got worse. The recovering Russian economy went into shock with the news, as the stock market plunged nearly 20 per cent.

The panic spread from Russia's elite business circles, through Moscow-based Western media, to Western investors, who began to rethink their Russian expansion plans.

It was an exact repeat of the furor created by earlier government harassment of two other once-prominent tycoons, Boris Berezovsky and Vladimir Gusinsky.

But interestingly enough, ordinary Russians kept their cool. In a poll taken at the height of the affair, 53 per cent said they hadn't heard of it.

Considering that most Russians have a hard enough time making ends meet - and those who do think about their country's new rich invariably believe they are criminals anyway - this raises some awkward questions.

Russia's embattled billionaires may have replaced the old regime's Soviet dissidents as pro-democracy symbols in the minds of some Western champions, but they don't quite live up to the billing.

The Russian oligarch is a blend of 19th-century robber baron and 21st-century computer-savvy CEO. Although some (such as Khodorkovsky) have made a point of reforming themselves, they operate in an incestuous, corrupt and often deadly world of insider dealings with authorities.

They live, in fact, in a different country from most Russians, as they move from their limousines to luxury apartments in Moscow to their country estates in England and France.

There's nothing wrong with such wealth, but the oligarchs' unbridled control of vast concentrations of capital, in a country where many people lack dependable electricity, endangers a fragile, evolving market democracy like Russia's.

The specific reasons for the crackdown may never be known.

Some observers point to Khodorkovsky's attempt to buy a state-owned oil company, which would give him decisive control over a key resource.

Others point to his funding of opposition parties, which supposedly breaks a private understanding between Putin and the oligarchs in March, 2000 not to investigate the shadowy origins of much of their wealth, in return for keeping out of politics.

Or, as critics both in Russia and abroad suggest, it may be thuggish political power at work.

But it is also reasonable to assume this is a legitimate (though questionably timed) battle against corruption and mafia-style business tactics.

Putin, who will run for a second term next year, has repeatedly promised to rein in the oligarchs. And his popularity rating now is a stunning 78 per cent.

The oligarchs have powerful allies. Khodorkovsky counts among his friends Henry Kissinger and Condoleezza Rice.

This fall, Putin travels to Washington. President George W. Bush, under pressure from corporate contributors with large Russian interests, might be persuaded to lobby for the oligarchs in the name of free enterprise.

That would be a mistake. But if he did, Putin would be right to refuse. Instead of 11th-hour backroom deals (or higher tax payments), the new Russian courts should be allowed to do their work.

The most important contribution Western critics could make right now is to reiterate that no one is above the law.

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