#1 - RW 266
RFE/RL Russian Political Weekly
Vol. 3, No. 29, 23 July 2003
PUTIN AND YUKOS: ELECTION-SEASON POLITICS OR BUSINESS AS USUAL?
By Gregory Feifer

Great expectations have long helped President Vladimir Putin cultivate his image, and this political season is no exception. When British Prime Minister Tony Blair visited Russia in the spring to offer an olive branch after Moscow's opposition to the U.S.-led attack on Iraq, Putin stunned even his own foreign-policy establishment by crudely embarrassing his guest. With Blair standing next to him at a joint news conference, Putin mocked the claim that weapons of mass destruction existed in Iraq -- the main pretext for going to war. He went on to challenge Blair's vision of a U.S.-led global-security framework.

Several months on, the Russian president nonetheless found himself feted during a trip to London. "President Putin is the best Russian leader since Tsar Alexander II," wrote "The Times," which went on to praise Putin for doing "more to consolidate freedom" than any predecessor since the 1860s.

So how to square such superlatives with a recent string of occurrences that seem to show that he has done anything but?

Like almost every other year, Russia this summer has seen fresh sorrow and scandal, including the deaths of Sergei Yushenkov and Yurii Shchekochikhin, two State Duma deputies who were among the most vocal and upstanding defenders of human rights. Causes and motives are still under investigation, but the absence of these two men is a heavy blow to the advancement of individual liberties. Meanwhile, well into the fourth year of the war in Chechnya -- launched ostensibly to crack down on terrorism -- Chechen suicide bombers are increasing their attacks on civilians outside the breakaway region, the result of an increasingly radicalized civilian population suffering at the hands of Russian forces. And in June the Media Ministry shut down TVS, the country's last independent television station.

However, all these troubling events -- which can speak only of a steady erosion of freedom -- have most recently been greatly overshadowed by the start of investigations into Yukos. Led by the once-reviled banker Mikhail Khodorkovskii, the oil giant had become a poster child for Russian progress even before it announced a merger with Sibneft earlier this year to form the world's fourth-largest oil producer.

The probe into Yukos began with the arrest earlier this month of the company's financial strategist, Platon Lebedev, on charges of embezzling state property in a 1994 privatization, and quickly grew to include escalating accusations of murder and tax evasion. Masked police forced their way into the company's archives, taking documents and computers. There is no sign the standoff will abate soon, and indications that other companies may also fall prey.

Speculation about the people and motives behind the Yukos affair has spawned a cottage industry alongside Moscow's already burgeoning political rumor mill. The growing list of suspects includes the president, various factions of his entourage, rival businesspeople, and many others. In general, the scandal has largely been seen as part of the jockeying ahead of parliamentary elections in December. But is this year's record really any different from that of the rest of Putin's presidency?

Most agree the investigations come as a warning to Khodorkovskii -- reportedly Russia's richest man -- to curb his recent public forays into politics. These include financial contributions to liberal parties Yabloko and the Union of Right Forces, as well as rumors that Khodorkovskii wishes to enter the political arena himself, perhaps to run in for president in 2008.

The investigations might also have been sparked, some say, by a think-tank report earlier this year warning that a number of oligarchs led by Khodorkovskii are planning on staging a "coup" by eroding the president's power.

Both reasons are likely significant. More important, however, is that the investigations are also just the latest in a series of attacks against politicians and businesspeople that began with Putin's first days in office.

Soon after Putin's election in 2000, a string of investigations began into Russia's largest companies, including No.1 LUKoil, top automaker AvtoVAZ, metals giant Interros, and others. The pressure against these companies -- which were always at least publicly loyal to the Kremlin -- cast a wider net than the much-lauded campaigns against vocal Kremlin critics Boris Berezovskii and Vladimir Gusinskii, who are both now in exile. The various parts of these men's media empires were one by one taken over by Kremlin-friendly managers in a series of moves culminating in the shutdown of TVS this year.

Following the abandoned investigations, the shaken recipients, led by Interros chief Vladimir Potanin, said they had learned not to meddle in politics. Putin meanwhile pledged not to revisit the murky privatizations of the 1990s in which the few well-connected gained control of large swaths of Russia's industrial assets for a song. It is not likely a coincidence that Potanin reiterated his position and apologized for past wrongdoing just days ahead of Lebedev's arrest this month.

These combined campaigns were the direct result of the 1999 election campaign. Once in office, Putin lost no time shutting down independent potential rivals and taking control of the media outlets that had helped forge his image as a competent, decisive ruler bent on restoring Russian greatness -- the image he so deftly showed in Britain last month. Knowing firsthand television's power to shape electoral consensus, Putin appears not to have been content until all main outlets were brought under state control.

The ruse seems to have worked: During his recent British trip, when Putin was continuously lauded for "bringing stability" to Russia after a decade of Yeltsin-era chaos, the attacks against the oligarchs in 2000 were often cited as proof. But is he not actually doing the opposite for the country?

Much of the blame for the Yukos affair has been apportioned to certain actors within the administration. Fingers have been pointed at members of Putin's so-called St. Petersburg group, including Federal Security Service Director Nikolai Patrushev and former KGB agents in the top echelons of the presidential administration. While these men might indeed be making a bid for greater influence, few would disagree with the general opinion that none of them could have acted against Yukos without the president's approval. That the Kremlin remains silent on such issues while state agencies do the dirty work is indeed an integral part of its schemes.

By allowing the attack against Yukos, Putin has further exposed himself as an old dog, albeit one whose new tricks show him to be a master of Russian politics. He has worked ceaselessly to restore top-down vertical control, with himself at the top of the pile.

Putin's is not Westernizing reform. It does not strengthen the rule of law. Stability is actually the last thing Putin wants -- hence the breaking of his own promises to the oligarchs. Instead, the president has actively eroded what little rule of law existed in Russia to reinforce a Soviet- and tsarist-era understanding that status within the political and economic systems depends on personal relations and, logically, loyalty. Unpredictability is central to maintaining control.

Putin's policy of staffing various state agencies with his former KGB and police comrades-in-arms -- the so-called chekisty -- has increased his leverage over the government apparatus, as well as the Kremlin's domination over parliament, the judiciary, and indeed much of society.

But Putin's silence also conceals his weaknesses by papering over splits among various clans vying for power within the Kremlin. While Putin has derived a large degree of power for himself at the center of the traditional-style oligarchy he has helped resurrect, he does not control it at will. In part, he serves as arbitrator among those who could undermine his role were they to gain too much influence. Political observers are now warning that the siloviki -- those who run the military and law-enforcement agencies -- are in danger of unseating business interests to Putin's detriment.

The oligarchs have shown some signs of fighting back. Top business lobbyist Arkadii Volskii, the old-boy head of the Union of Industrialists and Entrepreneurs, appealed to Putin to "take measures to stop the reckless campaign unleashed by forces for whom stability is a threat, " noting that these forces have brought Yukos share prices plummeting and have foreign correspondents warning once again that Russia is not the investors' paradise proclaimed just weeks earlier. Yukos has lost at least $8 billion of its value while the stock market in general has hemorrhaged billions.

Khodorkovskii himself, after playing down his own questioning by authorities, warned he would consider cutting off oil supplies to some regions if investigators continue their course, calling their actions the result of "petty internal political intrigues."

But at this late stage in the consolidation of Putin's power, there is little the oligarchs can do. After acquiescing to the rules laid down early in Putin's presidency, Russia's economic elite has been forced to play by them -- hence the relative timidity of their appeals and the absence of direct accusations against the president himself. It also accounts for Potanin's voluntary verbal self-flagellation, which, as opposed to publicly defending oneself, is generally seen as the only realistic way to get ahead these days.

As everyone rightly says, the elections heighten the political jockeying. The main benefactor of 1999's election-season tumult, Putin might not know how to act otherwise.

Unfortunately for others, the deck is stacked too much in the Kremlin's favor. As in Soviet days, the leadership is once again bludgeoning society with denials -- not least about the war in Chechnya -- and manipulation to a point that has become all too evident for even the most insistent of optimists to explain away.

Those who hailed Putin's trip to Britain as a display of Westernizing normalcy have only bought into the president's arrogance of power. Putin's showmanship actually belies a state of artificially prolonged political crisis still going a dozen years into the post-Soviet era.

Gregory Feifer is a freelance writer living in Paris. He was based in Moscow from 1998-2003.

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