>From: "Eubulides" <paraconsistent at comcast.net>
>Reply-To: lbo-talk at lbo-talk.org
>To: <lbo-talk at lbo-talk.org>
>Subject: [lbo-talk] Russia
>Date: Sun, 17 Aug 2003 20:59:08 -0700
>
>[Los Angeles Times]
>Russian Probe Stirs Debate on Privatization
>State-owned businesses were sold cheaply in the 1990s. A few profited but
>the masses lost out, critics of the deals say.
Really? I had no idea! :)
From Transitions Online:
Strangling a Cuckoo or a Golden Hen?
by Sergei Borisov and Andrew Gardner
ULYANOVSK, Russia and PRAGUE, Czech Republic--The first warning that a storm was brewing for Russia’s oligarchs came in May, when the National Strategy Council attacked Russia’s oligarchs as having a system of values dominated by “hedonism, the cult of money as an instrument of power, [and] the intentional disregard of people who are not part of oligarchic corporations.”
Their values went against those of the Russian nation, the report argued, adding that the oligarchs believe “the interests of the majority of people should not be counted” because Russians have a peculiar ability to accept unlimited suffering. The oligarchs’ self-interest was so great that they were planning a coup, the report concluded.
Liliya Shevtsova, an analyst with the Moscow Carnegie Center, describes the head of the National Strategy Council, Stanislav Belkovsky, as a “provocateur” and argues that “the whole thing smells bad.” It is a view echoed by the Moscow-based American analyst Peter Lavelle, who calls it a “laughable” notion in a report that itself was a “provocation of a provocation.”
“What the oligarchs want is a state that is more efficient and takes far fewer bribes,” he says.
Maybe, but opinion polls also suggest that the language of class war plays well with Russians. According to an opinion poll in mid-July, 77 percent of Russians blame oligarchs for the current state of affairs--which, as it happens, is relatively good as the economy is in its fifth year of growth and the oligarchs’ companies are at least paying some taxes. This antipathy translates into a desire for retribution: The same percentage believe that the results of privatization should be revised, fully or partially, and 57 percent would not object to seeing the state prosecute entrepreneurs.
Sergei Alexashenko, the deputy director general of Interros, a large holding group, sees the figures as a result of brainwashing on state television that has fueled the urge to “rob the robbers,” a reference to a Bolshevik slogan from 1917.
Whatever the truth of that, as prosecutors began to uncover the various alleged faults of men close to the arch-capitalist, Mikhail Khordorkovsky, the richest man in Russia--murder, embezzlement, and tax evasion among others--the notion spread that this was a war against the “oligarchs” as a class. The next logical step was to argue that the class war would lead to a revolution--with the beneficiaries of the “redistribution of property” being “those leading the attack,” as Viktor Loshak, editor in chief of Moscow News, wrote.
So far, though, it is too early to talk about a revolution. The capital of the arch-capitalists remains in their hands, and no action has been taken against other oligarchs. Nonetheless, there remains a pervading sense of class war. Vladimir Potanin, the billionaire head of the Interros group, even publicly apologized for past excesses--and promised his support for the pro-Kremlin parliamentary coalition United Russia.
THE POLITICAL GAIN
But if the attackers have not made any economic gain yet, what about political gain? A widespread argument is that Khodorkovsky, cuckoo-like, strayed where he didn’t belong when he announced he was funding political parties. It was a notion indirectly supported by Khodorkovsky himself when he said that, in 2000, Russian President Vladimir Putin gathered the oligarchs together and told them that “a barrier would be erected between everything that happened before 2000 and everything after 2000” as long as they did not become involved in politics.
But there are weak points in the argument. Khodorkovsky continued funding parties after the meeting with Putin in 2000, and the parties that he is backing--the Union of Rightist Forces (SPS) and Yabloko--are minor. In December’s elections, both will struggle to get into a Duma in which Putin will undoubtedly emerge with majority support. Moreover, if the attack was designed to persuade Khodorkovsky to pull out of politics, it has had the opposite effect: Khodorkovsky has said he will increase funding to both the SPS and Yabloko so that they can strengthen and extend their regional branches.
Another argument that sees politics as the cause of the crackdown is the same--but with the extra dimension that Khodorkovsky will seek the presidency in 2008. Without disclosing his plans, he had already said he would retire from business in 2007. The principal contention is the disclosure of his plans prompted a dispute between relatively liberal figures brought into the Kremlin by former President Boris Yeltsin and Putin’s siloviki, figures from the security, law enforcement and defense agencies.
A weakness in this argument, though, is that it does not explain why Khodorkovsky is the target. Implicitly, it suggests that Khodorkovsky is a champion of a faction within the Kremlin that belongs to the “Yeltsin family”--and that, in a way much more threatening to Putin, he has been far more politically active than just funding parties. But though seen as close to the Yeltsin family, Khodorkovsky is not generally viewed as allied to a faction in the Kremlin. The man who will enter the presidential race with the backing of the now entirely state-owned television will surely come from inside the Kremlin--assuming that Putin has a decisive influence in choosing an heir.
Seen in this context, Khodorkovsky’s presidential prospects might seem weak. He is not a Kremlin insider, his political power base--if that is how SPS and Yabloko can be viewed--is peripheral, and his status as an oligarch could be a political bane in a country where the class war rumbles on.
STOPPING KHODORKOVSKY’S CHALLENGE
Nonetheless, Khodorkovsky is a real challenger. While wealth might not buy an outsider space on state-owned media, it can bankroll a grassroots campaign. Moreover, if there is a clash of clans within the Kremlin, it could weaken his potential opponent in the presidential elections.
But there is also a more fundamental challenge: a change in the relationship of big business to the state. As Khodorkovsky said a few days after the arrest of Yukos’ third most senior figure, Platon Lebedev, Yukos “is the country's biggest company, and its most independent. That, we understand, is unpleasant, especially to people who think in the old style.”
Yukos’s “new style” involves an image policy that presents him as a man in the Western model. His company was the first to use international accounting standards and has paid dividends. Khodorkovsky has been busy making friends with Westerners in high places, and he has also sought to grab some of the respect accorded to the philanthropist George Soros by creating a philanthropic fund called the Open Russia Foundation, in obvious homage to Soros’ Open Society Foundation.
But the difference in the Khodorkovsky model goes beyond image and back to his role as chief of an aggressive, privately owned oil giant. Before Yukos surged to prominence, both production and distribution were dominated by state-owned companies. Yukos is a fast-growing challenge in both areas. Yukos plans to merge with Sibneft to create the Russia’s largest oil producer and wants to build private pipelines eastward to China and westward to Murmansk. Yukos represents the (partial) decoupling of oil and the state, and his support for measures to improved the terms of investment for foreigners would accelerate that decoupling.
This is far from the Russian model seen of the past decade, in which oil and gas companies have provided healthy incomes for past luminaries, bankrolled pet projects, subsidized friendly countries, and threatened fuel-dependent former Soviet republics. Privately owned Yukos, the most dynamic company on the Russian oil market, would therefore not just break with the model but could also affect foreign policy.
Suddenly, Khodorkovsky’s wealth and ambitions are being cut down to size. His paper wealth is being reduced by the fall of the stock market, the merger with Sibneft had, until 14 August, been put on hold by the Anti-Trust Office, he is (presumably) being diverted from managing his business to protecting his assets, and he is being diverted from building his own political career to handling intrigues.
Beyond that, his image could be shredded. Khodorkovsky’s potential chief electoral card--being the first serious presidential candidate in a more Western model--is being tugged away. Instead he is finding himself drawn as a capitalist ogre and associate of killers. The question is whether Russians will believe the charges--but if you want to dirty someone’s image, it’s better to throw some mud--real or imagined--than not to throw any. And the message from the opinion polls suggests that in the public’s mind, the mud could stick.
WHY NOW?
Still, if Khodorkovsky-backed parties are not a factor in December’s elections and presidential elections are five years away, why was the attack launched now? Coming just months before elections, the temptation is to think that it does fit into the electoral cycle.
The risks for the instigators were substantial--potentially uniting the opposition--and that is exactly what has happened. The development has prompted what, a year ago, might have been very surprising comments from Communist Party leader Gennadi Zyuganov. He does not view the Yukos affair as class warfare, but as “barbaric.” And while still arguing that Russia's rebirth depends on “resources and other main sectors [being] under state control,” Zyuganov now says he is for “a multifaceted economy” that will win the support of “big capital producers." The attack on Yukos was harming the economy, which he argues is “stagnant and going nowhere."
Nonetheless, if Khodorkovsky was ever going to be cut down to size, this was as good a time as any. Until 14 August, there was still a chance that the Anti-Trust Office could have halted the merger with Sibneft. However, Yukos’s hopes of preventing the construction of a privately owned pipeline to Murmansk have recently been dashed.
At the same time, there could be immediate electoral gain. Even though the Communists were stripped of some of their parliamentary powers last year and suffered from defections, United Russia is still only neck and neck with the Communists. Creating a scare about a coup and turning Yukos into a capitalist scarecrow could steal extra votes from the Communists. It would also attack one source of Communist funding, as Khodorkovsky has said a Yukos colleague is funding the Communists.
Some may also argue that instead of uniting the opposition, it could prevent future linkups between Yabloko and the Communists, who in June combined forces in a vote of no-confidence against the government. (They were unsuccessful, but fell only 50 votes short of victory.)
The emergence of this unlikely alliance added to questions about the future of United Russia. Speaking a week before Lebedev’s arrest, Professor Igor Bunin from the Center for Political Technologies in Moscow argued that Putin, faced with the conundrum of why United Russia has failed to gain in popularity, faces the choice: to identify United Russia even more closely with himself and to give a structureless grouping of parties more backbone, or to look for more multilateral support. This could involve creating a new party or building up a junior party. In effect, United Russia would face competition for Putin’s affections.
Following this line of argument, some of the siloviki have strong reasons to take action.
And, as it happens, just before the United Russia congress in late June, Boris Gryzlov, the party’s leader and interior minister, was able to expound on the arrest of five senior policeman and the head of the security service at the Emergency Situations Ministry (arrests that had, conveniently, been televized live).
PUTIN’S ROLE
All this leaves the question of what role Putin is playing. So far his comments have been muted, while much of the analysis assumes that the president is a bystander. That may be so, but this case nonetheless involves him intimately. The Yukos scandals risk undermining many of the achievements that he was lauded for in London, a week before Lebedev was arrested: political stability, a fast-growing economy, a balanced budget, bulging currency reserves, the return of Russian capital, and a better business climate.
That was symbolized in London by the signing of huge new oil deals. Similar major signs of confidence are now questionable. As Vyacheslav Nikonov from the Politika Foundation has written, foreign investors must now be wondering how the elite is able “to strangle hens that are laying gold eggs.”
Putin’s muted reaction may suggest that he is weaker politically than the impression created by his strong ratings and three years of praise. Alternatively, it might indicate that the legacy that he is interested in is a Russian model of development in which big business is wedded to the state. It may also simply be that, surrounded by friends from St. Petersburg and the KGB, he has not yet realized how damaging the scandals could be.
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