Ben Judah - Fragile Empire - How Russia Fell in and Out of Love With Vladimir Putin

Khodorkovsky was practising extensive tax avoidance and throwing everything he had to stop taxes on oil profits going up. This left the government spitting at his grandiose speeches about how his charity work was going to educate 2–3 per cent of students in Russia who had been left behind by an ‘inefficient state’. Even the old Yeltsin man, Mikhail Kasyanov, who saw nothing wrong with Khodorkovsky’s plans to merge with either of the Western oil majors ExxonMobil or Chevron said: ‘The fact that Khodorkovsky was allegedly buying up the deputies, I once angrily told Putin myself.’ 32

Putin had warned the oligarchs to stay out of politics if they wanted to carry on in business. In 2000, when he had gathered the twenty-one tycoons in the Kremlin to spell this out to them, Khodorkovsky had been there. Putin had showed what happened – through Berezovsky and Gusinsky – if they didn’t. Most tycoons did not see this ‘offer’ as an attack. Most were relieved and did the best they could to comply: they were moneymakers uninterested in politics. They were not real businessmen, who had built up the oil fields, but courtiers who lived in fear of losing their cash cows.

Khodorkovsky was different. He not only interfered but tried to block Putin from turning the oil boom into state power. His lobbying was to show Putin that he held the property rights to Yukos, that he was strong enough to stop his profits being turned into tax – that he was sovereign over oil. Khodorkovsky had always been different. At the very beginning he had been warned – that the last time when young men in the Komsomol were encouraged to dabble in business, in the 1960s, some of them had ended up arrested. ‘I did not remember this,’ he once boasted, looking back gleefully laughing at that moment when he had followed his instinct. 33He was not a man who listened to the cautious – not when every risk had brought massive returns. It was simply too late for him to stop taking them.

At the time the oligarchs, like most Russians, were more frightened of a weak state than an overbearing one. Moscow was paranoid that the Russian Federation could go the way of the Soviet Union. Putin’s assertion that a ‘weak state is a threat to democracy’, rang true. 34To be more precise – most oligarchs were convinced that a weak state was a greater threat to their property rights than an authoritarian one they got on with. Most were happy to exchange less room for manoeuvre for increased asset security.

Not Khodorkovsky. By 2003 it looked like he was breaking the ‘deal’ to stay out of politics in exchange for his fortune. He was increasingly promoting an agenda at odds with Putinism. Khodorkovsky began to campaign across the eleven time zones with his ‘Open Russia’ foundation. As the Kremlin tried to co-opt elites, Khodorkovsky was building an alternative institutional network of think-tanks and charities, funding political parties and paying for ever more Duma members. He wanted to educate 2–3 per cent of students in his charity schools. So, people began to ask – how many relatives did those 2–3 per cent of students have? So, how many voters does that turn into?

As the head of Russia’s biggest company Khodorkovsky was the only businessman who felt he could stare down the state. In fact, in 2003 he was nothing less than the most powerful businessman in Russian history. Neither under Yeltsin nor the tsars had a tycoon ever openly flouted the supreme interests of the Kremlin in such a way before. And all this on barrels of oil that many officials felt they had given to him for $350 million in exchange for loyalty.

The President had not ‘liquidated’ the oligarchs as a class. Their wealth grew exponentially during his first term. In 2000, zero Russians featured on the Forbes billionaires list, by 2003 there were seventeen. Should Putin be unable to show himself stronger than the richest of them, it would have left him vulnerable to them all. ‘Khodorkovsky was playing politics in the way it had been played before,’ observed Sergey Aleksashenko, the former deputy head of the Central Bank, ‘And he expected to get the same results as before.’ With the arrogant swagger of a kingmaker, boasting of his hired deputies, Khodorkovsky wanted to be the new Berezovsky.

Putin was considered weak. This is why Putin felt he needed to do something that would be so damaging to Russia’s reputation and so contested within the Kremlin itself. The endgame for Khodorkovsky risked being the endgame for Putin if he botched it. There is an expression in Russia – if a pack of wolves is following you in the forest, remember you only have to kill one, otherwise they will devour you.

Reflecting frayed nerves inside the government, the Kremlin-linked pamphleteer Stanislav Belkovsky published a ‘paper’, which argued that the oligarchs were not only increasingly powerful but also were plotting to stage a constitutional coup. First, they would buy up the Duma, then turn Russia into a parliamentary republic, before overturning the FSB security elites once and for all as they gloriously installed Khodorkovsky as a new, all-powerful, prime minister. This ‘research’ reflected real unease. When Belkovsky published his ‘analysis’, Putin was still considered to be just another president. It read:

In circumstances where the country has virtually no real political parties, where the institutions of civil society are weak or in the pocket of the powerful, where the systems of mass communication and the media are under the control of the oligarchs, such a radical transformation of the system of government is not in the interests of Russia or the Russian people. It would mean that oligarchs would be even further freed from any constraint connected with the objective interests of the nation. Such a weakening of the influence of the President would mean power flowing directly into the hands of big business, which would be freed from any real mechanism of control… we are in fact talking about the prospect of an oligarchical coup in Russia. 35

It was a warning to the tycoon. Khodorkovsky may not have been positioning himself for the presidency per se, but he was positioning himself as the leader of pro-American and liberal forces in Russia. He was so politicized that he had to make a declaration in 2003 that he was not intending to stand in the 2004 presidential election. Charles Krause, his American former spokesman, who was glued to Khodorkovsky at the time, explains his motives like this:

‘He never intended to run for president. That’s a complete fabrication. I saw him say repeatedly “I have a Jewish surname I can never be President.” But if you ask whether he intended to have some form of public life after 2008 when the Putin era was supposed to end, I think that he was.’

The authorities felt under attack – and they were. Khodorkovsky had started publicly insulting Putin – accusing his government of being corrupt and incapable. On 19 February 2003, the shadow-boxing between the richest and the most powerful two men in Russia came into the open – in a meeting broadcast nationally. Putin had summoned the country’s most powerful businessmen to the Kremlin to discuss with them the challenge of mounting corruption. Khodorkovsky had prepared a slideshow of opinion polls on the topic and its content as he revealed it in the domed hall – was explosive.

• Slide Two : 27 per cent of Russians thought corruption was the most serious threat to the nation.

• Slide Three : 49 per cent of Russians thought corruption had spread to the majority of state officials including ‘the highest levels of federal power’.

• Slide Four : 32 per cent of Russians felt that the leadership was powerless to tackle corruption; 29 per cent of Russians felt the leadership chose not to tackle corruption; 21 per cent of Russians felt the leadership neither wished nor is capable of tackling corruption.