The Times (UK) March 29, 2004 Yukos: has a deal been done? Mikhail Khodorkovsky, the jailed oil tycoon and critic of President Vladimir Putin, has today performed a volte-face and thrown his support behind Russia's leader. Jeremy Page reports from Moscow.
Has Mr Khodorkovsky struck a deal with the Kremlin?
It looks that way, although it is impossible to say for certain. In his article for the Russian financial newspaper Vedomosti, published today, Mr Khodorkovsky strikes a contrite tone and directly contradicts his previous position.
It implies that some kind of deal has been, or is about to be, struck.
Before his arrest at gunpoint in October, the richest man in Russia had campaigned strongly against proposed higher taxes on Russian oil companies, including his firm, Yukos, Russia's largest.
The campaign had seen Mr Khodorkovsky lobby politicians in the Duma, Russia's lower house of parliament, to oppose the legislation.
This annoyed the Kremlin and precipitated the legal case against him.
Mr Khodorkovsky was also one of Mr Putin's strongest critics. He had questioned whether Mr Putin's claim to the presidency was legitimate and argued that the ex-KGB man was not a democrat.
But in his article today, Mr Khodorkovsky now says the reverse. While writing that Mr Putin is "probably not a liberal or a democrat", he is nonetheless "more liberal and democratic than 70 per cent of the population".
Is he still due to face trial?
Yes. Five months after his arrest Mr Khodorkovsky remains in prison and faces trial on charges of fraud and tax evasion. He has had access to the prosecution's case against him, as is required by Russian law.
The charges relate to the controversial privatisations of Russia's state assets, including its oil firms during the tenure of President Yeltsin in the 1990s. If convicted he could face up to 13 years in jail.
Most Russians regard businessmen like Mr Khodorkovsky, who made their fortunes out of these privatisation deals, as little more than thieves who have stolen assets that belonged to the people.
What is Mr Putin trying to achieve?
Mr Putin's central aim is to get big business to pay more taxes. He also wants to boost the authority of central government through regulation. In other words, he is trying to get the captains of big business to do what the Kremlin wants.
Many large Russian firms use offshore tax havens or onshore havens to avoid paying taxes. Oil firms like Yukos and Sibneft, which is 92 per cent owned by the Chelsea FC boss Roman Abramovich, have reduced their tax rate to around 12 or 13 per cent from 24 per cent since the 1990s.
The Kremlin wants some of this money back, even though the companies avoided paying these taxes perfectly legally. This is because the legal framework set up after the collapse of the Soviet Union was weak, and Mr Putin thinks many companies exploited these weaknesses and ought to repay some of the vast fortunes that were made.
Lukoil, another huge Russian oil firm, has already agreed to pay significant sums back to the state and other firms may soon follow suit. I expect we could then see new legislation that would bring in a more rigorous tax regime for large companies.
Mr Putin might also want to see a change in the ownership of Yukos to someone who is more compliant. This could even see the company bought by foreign investors.
No-one expects Mr Putin to renationalise the oil firms however, because such a move would risk the ire of the international business community and could, by extension, threaten the economic growth and stability that Mr Putin has achieved in the last three to four years.
Do ordinary Russians support Mr Putin's stance?
Most support his efforts as more than a decade after the collapse of Communist rule, many still believe strongly that the land, mineral wealth and factories belong to the people.
This view is reinforced because few ordinary Russians see the benefits of the capitalist system, while the privileged few are seen enjoying all the trappings.
Many businessmen will be worried however, and not just the few billionaires. They will have got their hands on wealth through illegal means or through exploiting the tax system, and will fear that they might be next.
The case of Mr Khodorkovsky has sent out the message that the Kremlin is back in control and could embolden provincial prosecutors to pursue smaller businessmen.
Moscow Times March 30, 2004 Khodorkovsky Seeks Peace With Putin By Catherine Belton Staff Writer
Jailed oil magnate Mikhail Khodorkovsky has called for an end to attempts to undermine President Vladimir Putin and said big business should pay more taxes in return for having its property rights legitimized.
In a sharp turnaround from the fighting talk and warnings of looming dictatorship before his arrest, Khodorkovsky conceded in an article published Monday and penned from his cell in Matrosskaya Tishina prison that Putin was a positive force for reining in increasingly popular nationalist politicians.
He lashed out at liberal Boris Yeltsin-era policymakers for lining their pockets during the privatization process as the vast majority of the population plunged into poverty. He blamed big business for feeding that crony system, which, he said, has led the nation to scorn liberal parties such as the Union of Right Forces, which he funded.
The article, published in Monday's Vedomosti, marks the first time the nation's richest man has vented his opinions since his Oct. 25 arrest at gunpoint on charges of large-scale fraud and tax evasion -- and is the closest Khodorkovsky has gotten to openly seeking peace with Putin.
The case has been seen as key for a Kremlin drive to establish greater control over big business and is seen as the result of a power clash between Putin and the increasingly ambitious Khodorkovsky.
If six months ago Khodorkovsky was squaring off with Putin, pushing for an independent foreign and energy policy and trying to block the passage of higher taxation on the oil industry through the State Duma, now he is calling for more support for the president.
"We have to reject senseless attempts to undermine the legitimacy of the president," he wrote. "Independent of whether we like Vladimir Putin or not, it is time to realize that the head of state is not just a person. The president is an institution that guarantees the integrity and the stability of the country."
"And God forbid we should live to see that institution collapse. Russia will not survive another February 1917. The country's history dictates that a bad leader is better than none," he wrote.
With the rise of nationalist parties, such as Rodina in last December's Duma elections, Putin, he said, had become "liberal No. 1."
"Putin is not a liberal or a democrat, but he's still more liberal and democratic than 70 percent of our country's population," Khodorkovsky wrote, crediting Putin for not allowing nationalist forces to take power.
Analysts said that the article, which ran under the headline "The Crisis of Liberalism in Russia," appeared to be an attempt by Khodorkovsky to demonstrate his loyalty to Putin as his trial date nears. Some analysts said it could be a first step by Khodorkovsky to strike a deal with the Kremlin in a bid for greater leniency.
One insider said the article was an attempt by Khodorkovsky to distance himself from his business partner and fellow Yukos shareholder Leonid Nevzlin, who has been vocal in his criticism of the Kremlin, claiming in a recent interview that the Kremlin wanted to force a change of ownership at Yukos.
"This is a sign of a public split between the shareholders of Group Menatep," said one insider, speaking on condition of anonymity. "Public opinion in Russia is pretty radical and Putin is limiting the damage. ... In the meantime, Nevzlin is working together with Berezovsky to destroy Putin."
"Nevzlin is playing political games in which Khodorkovsky wants no part," he said.
Khodorkovsky's article comes a week after the Rossiiskiye Vesti newspaper reported a claim by unnamed intelligence sources that Nevzlin had tried to organize a contract hit on Putin before the recent Cabinet reshuffle in an attempt to replace him with former Prime Minister Mikhail Kasyanov.
A spokesman for Nevzlin declined to comment on that article Monday, dismissing it as "rubbish." He said Nevzlin had no comment on Khodorkovsky's article.
In his Vedomosti commentary, Khodorkovsky underlined the divide between himself and Nevzlin by criticizing former presidential candidate and former co-leader of the Union of Right Forces Irina Khakamada, whom Nevzlin has said he is financing.
"We need to stop lying to ourselves and to society," he wrote. "I respect and highly value Irina Khakamada. But as opposed to my partner, Leonid Nevzlin, I refused to finance her presidential campaign because I saw in this worrying signs of lies. For example, whatever you might think about Putin, it is impossible -- because it is not fair -- to blame him for the Nord Ost tragedy."
Khakamada, as part of her presidential campaign, had criticized Putin for his handling of the October 2002 hostage crisis.
In the more than 2,000-word article, which is mainly a treatise on the demise and the rout of liberal parties in last December's parliamentary elections, Khodorkovsky calls for the liberals to repent their sins of the last decade, when many of their leaders took positions of power and enriched themselves while espousing pro-market reforms.
"Those whom fate and history entrusted with guarding liberal values in our country did not manage their task," he wrote. "We should admit this now with all openness. The time of craftiness is over, and from the cells of detention wing No. 4, where I am now, this could be clearer than from other more comfortable accommodations."
He said liberal leaders had forgotten the social needs of most of the people, as they became ever more distant from the population.
"Liberal leaders called ... their government a kamikaze cabinet," he wrote. "In the beginning, this is what they were. But by the mid-'90s they had gotten too used to accumulating Mercedes, dachas, villas, nightclubs and gold credit cards. The tough fighter for liberalism, ready to die for an idea, had been exchanged for a weak bohemian, who did not even try to hide his indifference to the Russian people. ... This bohemian example, filled with demonstrative cynicism, did a lot to discredit liberalism in Russia."
Khodorkovsky accused the liberal leaders of deceiving the people during the Yeltsin-era voucher privatizations, but stopped short of examining his own role in rigged deals that helped him earn a fortune of $15 billion, according to Forbes magazine's latest estimate.
Instead he lashed out at big business for its "willingness" and "submissiveness" to bureaucrats on the take.
"For an entrepreneur it is much easier to reach agreement with the cupped hand of a bureaucrat, than to agree his actions with a network of social institutions able to act," he wrote.
"For me Russia is my homeland. I want to live, work and die here," he wrote. "I want my descendants to be proud of Russia. ... Perhaps I understood this too late. I only began charity work and to invest in the infrastructure of civil society in 2000. But it's better late than never. ... I left business."
He called for big business to pay more taxes and agree to "other steps that might not be pleasant for owners of big business."
"We need to legitimize privatization," he said. In order to ensure this, he said, "We need to force big business to share with the people."
"This is not a repentance in the classic sense," said Igor Jurgens, executive vice president of the Russian Union of Industrialists and Entrepreneurs. "There is not a lot of looking into his own past. Instead, he calls for future taxation hikes and massive investments into the Russian economy."
"Khodorkovsky is stretching out his hand. The question is whether Putin will take it," he said.
Some analysts thought that Khodorkovsky's peace offering may have come as too little, too late.
"His pragmatism is back. He is trying to feel the political wind," said James Fenkner, head of research at Troika Dialog. "But it may be too late for that. Last year he and his partners thought they could walk on water."
Vedomosti editor Tatyana Lysova said the article landed at the paper at the end of last week without any prior negotiation.
Khodorkovsky's lawyer Anton Drel said his client had been working on it for three months.