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Moscow Times
January 14, 2005
Khodorkovsky, The Dubious Martyr
By Eric Kraus
Eric Kraus is chief strategist for Sovlink Securities. He submitted this comment to The Moscow Times.

It is difficult not to feel sympathy for a man confined to Russia's grim prison system, yet the letter by Mikhail Khodorkovsky printed by Vedomosit and The Moscow Times in December as neither a plea for leniency nor an acknowledgement of past errors. Instead, Khodorkovsky's letter constitutes a broad-brush condemnation of the political direction of Russia, by implication justifying the disastrous abuses of and by the Russian state during the late Yeltsin years when Khodorkovsky and his ilk held absolute power. Memories can be short, and a reply is called for.

Khodorkovsky rails against the rapacious bureaucracy, predicting that the angry mob will soon be baying for its promised bread and circus. Well, perhaps, but wouldn't it be odd if a nation that quietly suffered the indignities of 1998 -- left hungry, cold and utterly destitute following the collapse of the pyramid erected by the oligarchs -- should rise up in protest now? To use his own analogy, at present the people enjoy both bread and circuses. During the Boris Yeltsin regime they lacked not for circuses -- loans-for-shares was my personal favorite -- but the bread was cruelly missing. The bureaucracy may well be rapacious, but the state budget apparently benefits, too. Wages and pensions are now paid, in cash, in full and on time.

Similarly, a second redistribution of Soviet property would indeed be a dangerous undertaking, yet does this constitute a moral justification for the criminal carve-ups of the 1990s? Does it justify the original purchase of Yukos for some $300 million -- never actually paid -- in a rigged auction or the bloody takeover of Apatit? Does some notion of abstract justice require that Group Menatep now be allowed to sell half its plunder to Exxon for some $30 billion, a 200-fold profit? Though pragmatism mandates that past misdeeds be amnestied, new rules apply: Taxes will be paid, the Duma is not for rent, and money no longer buys absolute power.

A serious injustice has indeed been done. Not to the robber barons who treated Russia as their personal property but to the Yukos minority shareholders caught in a fierce political battle they were ill-equipped to understand. They have a very legitimate grievance, yet the blame lies at least as much with Menatep management as with the Russian state.

Certainly, it would have behooved the administration to find a less destructive means of prying Yukos from Menatep's grip, but equally -- from the beginning -- Menatep policy has been one of scorched earth. Hundreds of millions of dollars were lavished on a fiercely anti-Russian PR campaign, corrupting eminent academics and foundations in Moscow and abroad. Yukos' skillful spin management and press-agentry -- compounded by the Russian government's almost comical inability to communicate effectively -- have succeeded in trashing Russia's international reputation. Nevertheless, the benefits of this campaign for the Yukos minority shareholders are not intuitively obvious. Had it not been for the supreme arrogance of Menatep, had they instead relinquished their stake and sued for peace, the unfortunate shareholders would have doubtlessly been spared.

Khodorkovsky rightfully affirms that Russian history is characterized by an irrational worship of the state and the personalization of power. Yes, such power is potentially dangerous, yet with Russia still recovering from major surgery -- the breakup of the Soviet Union, the bankruptcy of the communist system, the Soviet Union's collapse as a global superpower -- isn't there a pressing need for the common man to have something to believe in? Is it somehow contrary to the natural order of things that Ivan Ivanovich should have a president he admires? Does Khodorkovsky still imagine himself the rightful successor to the throne?

Mikhail, the oligarchic model has been tried already. It was not a resounding success. Perhaps it was unavoidable, yet it was a road that led past ruin, default and penury, through the plunder of Russia and the impoverishment of Russians. Where was your concern for justice and the sanctity of property rights when Menatep Bank defaulted, or when cash flows were diverted offshore and multibillion dollar assets redistributed among a handful of cronies? Why such virtuous indignation only now? Isn't it a question of whose ox is being gored?

Let's not be disingenuous, Mikhail. The game is nearly over. This was no more about a tax bill than it was about you tossing a few rubles to the comically ineffectual Grigory Yavlinsky. It was about power. It was about who rules Russia, the oligarchs or the Kremlin. It was about the taxation of oil revenues and about the control of Transneft and Gazprom. It was about the basic definition of Russia's oil policy, the only useful tool remaining in Russia's diplomatic arsenal.

Though hubris is not defined in the Criminal Code, its consequences can be devastating. Impotent observers of a totally unequal battle, we wondered how could anyone of such obvious intelligence have overplayed their hand so catastrophically. We added up the forces on the chessboard, assuming you could too. There were precedents: Berezovsky and Gusinsky.

Did you imagine that the Russian people would storm the Kremlin walls for you? Or was it your American friends whose openly avowed neo-imperialism blinded them to the Russian political realities? Mikhail, you are Russian, and you should have known that President Vladimir Putin, as a child of the Cold War, would no more countenance American interference in Russian domestic affairs than Washington would allow the Kremlin to oversee the Federal Reserve. Did you really believe that, come Judgment Day, such dubious saints could intercede for you?

Mikhail, your conception of patriotism is quite singular. Yes, others before you have fought the state tooth and nail, but they at least refrained from couching their self-interest in terms of patriotism. Your courage is striking, and you have wreaked considerable havoc. Yet how has this advanced an open society in Russia? You have savaged your own cause, and the victories you won have pushed Russia to look inward, alienating her from newfound friends in the West. Your robust challenge to the state has served only to strengthen the conservative siloviki faction. In attaining your desired martyrdom, you have done Russia no favors.