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Unfiled November 13, 2003
Here Comes The Silogarchy
Understanding the Yukos Affair from the Surface Down By Mark Ames Browse author Email
Page 3 of 3
Apr. 10: "United Russia's French Party Line" [Moscow Times editorial]

United Russia's recent proposal that the party or parties that have a majority in the State Duma should be allowed to form the next government -- while nothing out of the ordinary in world practice -- would be nothing short of revolutionary for Russia. However, the fact that a tame creature of the Kremlin is advocating a policy that would significantly curtail the Kremlin's control over the government and parliament immediately gives grounds for scepticism.

Over the past couple of weeks, everyone from SPS leader Boris Nemtsov and Duma Speaker Gennady Seleznyov to Kremlin-connected spin doctor Gleb Pavlovsky has added their support to the proposal, which would lead Russia in the direction of a parliamentary-presidential system not dissimilar to that of the French Fifth Republic.

Apr. 14: "Japan Offers to Fund Oil Link to Siberia"

Energy-starved Japan is willing to help fund the construction of an export pipeline from Angarsk, near Lake Baikal, to Nakhodka on the Sea of Japan, Deputy Prime Minister Viktor Khristenko said Friday.

Apr. 17: "Putin Wishes Yukos a Happy 10th Birthday" [...] Putin congratulated Yukos on the 10th anniversary of its founding, the Kremlin said.

Apr. 18: "Private Pipelines Get State's Backing" The government on Thursday ended its opposition to private oil pipeline projects, saying it had agreed to study an idea to turn Arctic Murmansk into a vast oil port to boost supplies to Europe and the United States.

May. 19: "Putin Lays Out the Next 7 Years"

[...] The president also stirred up a political buzz with the kicker at the end of his speech, when he promised to consider forming a Cabinet of party members loosely based on the results of December's parliamentary elections.

[...] . Its highlight was Putin's vague promise to consider forming a "professional, effective Cabinet based on the parliamentary majority," an idea that has been bounced around among pro-Kremlin lawmakers for months.

May. 30: "Japan Fumes Over China's Deal With Yukos"

Japan sent a top energy envoy to Moscow to lobby on the deal but when the dust settled in Moscow on Wednesday, it was China's top oil firm signing the deal and Chinese President Hu Jintao putting his signature on a strategic energy pact with President Vladimir Putin.

Diplomacy and economics held equal sway when No. 2 oil major Yukos sealed a 25-year deal to supply Chinese flagship CNPC with 600,000 barrels per day of oil via a $2.5 billion pipeline starting in 2005.

Jun. 11, 2003: "What's the Scandal All About?" (By Vladimir Pribylovsky)

Recently, something of a scandal erupted over a report published by the Council for National Strategy attacking the oligarchs.

[...] The CNS states in its report that representatives of big business are preparing "to transform the system of government in the country with the aim of achieving a 'personal' union of big business and the executive branch. In reality, the country is on the verge of a creeping oligarchic coup."

[...] It is interesting that Khodorkovsky is mentioned in the lengthy CNS report 10 times and Yukos 25 times [...] In other words, the report first and foremost targets Khodorkovsky and Abramovich. It is these two, according to Diskin, who are the insidious ring-leaders plotting against Putin. [...] One of the most damning accusations leveled at Khodorkovsky in the report is the following:

"According to the plans of a key member of the ruling class, as early as 2004 a new government may be formed under the control of and accountable to the parliament. The front-runner to be prime minister of such a government, formed under a new constitution, is considered to be Mikhail Khodorkovsky."

Jun. 23: "Putin Says Poverty Still the Enemy"

"I don't like the word oligarch," said Putin [...] "An oligarch, in our general understanding, is a person who has stolen his money and who continues to steal by taking advantage of his access to power. I am doing everything to make sure that this situation doesn't repeat itself. I don't see these kinds of people. But maybe someone is trying ..."

As to reports of an impending "oligarchic revolution," Putin said he was satisfied with the relationship between tycoons and the state. "Today, those who disagree with this position are -- as they say -- long gone," he said, referring to exiled tycoons Boris Berezovsky and Vladimir Gusinsky.

When asked by a journalist from Vladivostok about possible routes for a new oil pipeline to the east to tap Asian markets, Putin said he was leaning toward the route from Angarsk to the Far East port of Nakhodka over a rival route backed by Yukos that would go directly to northern China.

Jul. 2: Putin's Dangerous Personnel Preferences (Olga Kryshtanovskaya)

[...] In general, over the three years of Putin's presidency, the elite has become more militarized, less intellectual and more closely linked to business [...] Given that there is no real separation of powers in Russia and that the authorities are trying to restore monopoly power, expanding control to all areas of public life, and in the absence of a strong political opposition, businessmen are one of the few forces capable of resisting the onset of a neo-authoritarianism. Russia has handed big business the unusual role of providing some form of checks and balances.

July 3: "Head of Yukos' Parent Company Arrested"

Platon Lebedev, the director of Group Menatep, the majority shareholder in the Yukos oil major, has been arrested on suspicion of embezzlement dating back to 1994, prosecutors announced Wednesday.

Jul. 7: "Head of Yukos: It's a Kremlin Struggle"

Khodorkovsky saidm "If I wanted to be a dissident, then I would probably do that, instead of business."

When viewed in hindsight, there is a clear thread, a conflict which boils to a head and finally comes to a resolution with Putin's strike and apparent victory.

If we can trust the surface events, this conflict is not about Khodorkovsky funding liberal opposition parties, as many Western reporters now argue. And if you frame this as a simple Mafia turf war, thieves swiping from other thieves, you're obviously cutting out all the meat and muscle from this drama.

Instead, taken as a narrative, what you see developing is this: Yukos, flush with billions in cash and basking in sudden international glory as a model Western-style company, began to flex its awesome newfound power. The heart of the battle seems clearly to be control over pipelines -- this is where Yukos' economic interests clashed in a zero-sum game with the Kremlin's power interests. Yukos led a kind of oil-major rebellion against the Kremlin, lobbying to privatize the oil monopoly. In a sense, it was attempting to disarm the Kremlin. Khodorkovsky proposed building private pipelines favoring the world's two biggest powers -- America and China -- making it in their interests to lobby the Kremlin to open up as well. He was gathering all the might of international capital and political clout on his side.

Meanwhile, the Kremlin seemed to hem and haw over choosing pipeline networks and policy. Khodorkovsky upped the rhetorical ante. He seems to have decided that the only way to get the oil pipeline monopoly broken would be to launch a broad attack on the government, charging it with corruption and bureaucratic statism. It also seems likely, by the surface reports, that he really was pushing for a power structure change that would have empowered the parliament and government at the expense of the president. I'm surprised how few people remember, myself included, how the idea of introducing a French-style parliamentary system was being lobbed around in the early spring, an idea at the time which was not linked, at least publicly, to Khodorkosvky.

It would make sense: his fight against the oil pipeline monopoly was stonewalled by a Kremlin that he could not get around, stymieing Yukos' expansion for the sake of keeping its one last lever of power over the oil magnates (not to mention its hand on the big pipeline piggybank). Putin's address at Gazprom in February, where he said the natural gas monopoly was too strategically important to break up, foreshadows how he will eventually resolve Yukos' attempts to crack the oil pipeline monopoly.

This came to a head in the oligarchs' lobby group meeting with Putin on February 19th, when Putin snapped at Khodorkovsky, ""I would like to hear concrete suggestions from you about what we should do, not just criticism." Still for the most part Putin seemed either indecisive or at times deferential; he seemed at the time to have been humbled. Indeed, even his own political party had started to suggest a change in the power-structure of government -- clearly a feint to give Khodorkovsky the impression that he was triumphing.

Reading this, I remember thinking at the time that Putin was looking weakened and Yukos looked like it would somehow rule Russia and perhaps half the world. Now we can see that Putin was simply in strategic retreat. As Yukos lobbied harder and grew more powerful by what seemed week-to-week, Putin gave the appearance of caving. In his state of the union address, Putin himself offered up the possibility of transforming the power structure towards a French-style republic. He wished Yukos a big happy birthday. And then when the time was right, he struck. You can almost feel his pent-up triumph, after all he must have had to endure while drawing Khodorkovsky in, when, on June 26, just a week before Lebedev's arrest but a few days after the attack had already secretly begun, he said, "I don't like the word oligarch."

There is something truly admirable and scary about Putin's method. It works every time, because if there's one thing he knows when battling against brilliant, powerful opponents, it's that their biggest Achilles Heel is always their hubris. And his style of operating is always to encourage that hubris to swell up. I've often heard "insiders" claim that Putin in real life is an indecisive man, nothing like the strongman we see on TV. That may be true...but I'd bet that playing the role of indecisive mediocrity when dealing with power-interests behind the scenes serves Putin just as well as appearing decisive and strong in public. After all, that strategy worked for Stalin.

Khodorkovsky's transformation is also fascinating to watch. It is disingenuous to ignore his savage rise to riches when lionizing him, but to simply see him as the person he was in 1995 or 1998 is to deny human psychology. Put it this way: if a 25 year old espresso-steaming geek becomes a rock star, he changes. Some of these stars go through a few changes in their megalomania, including the hyper-arrogant asshole stage, the I know the answers to everything stage (which comes from being surrounded by fawning lackeys), and the sainthood/giving back to the people stage.

Khodorkovsky's triumph during the most brutal, cold-blooded phase of Russian capitalism, and his successful image transformation and subsequent stardom in the highest Western circles, must have affected him in ways that few could possibly understand. I'd doubt he saw himself as a thug or a thief; indeed, a man who gets all those billions and is elevated to superhero of international commerce can ONLY imagine himself as a force for good and a god above men. Just consider his quote in February, telling Putin, by way of an assembly of journalists, that "the situation was coming to a head." One thinks, in hindsight, that he was out of his mind with confidence at the time to talk that way.

Which brings me to the moral of this story. Should Khodorkovsky's arrest be seen as an attack on the embodiment of liberalism, or should we cheer it on with pitchforks and torches?

I think the real question is this: what will the effect of Khodorkovsky's destruction be?

On a gut level, I am with the pitchfork mob. I was with them when Putin went after Vladimir Gusinsky. I lost my jaw under the sink when I saw how the Western media portrayed this dark, cynical media don as a victim of a free speech crackdown. Gusinsky? He backed the wrong side in the power struggle in 1999 between the Luzhkov faction and the Putin faction -- and he lost. Therefore, he was thrown in jail and his assets, including his massive media holdings which he had once essentially stolen were stolen back. Had Gusinsky's horse won, there is no doubt that he and his media holdings would have forcefully backed a brutal crackdown on the media empires which supported Putin, complete with jailings and asset appropriations. Gusinsky as Vaclav Havel?

Now, looking back, it's time to admit the truth: in effect, the Western media and the PR handlers were right. Putin's intention at the time wasn't to destroy free speech -- but the effect of Putin's crackdown was essentially what the Western press, and all the analysts on Gusinsky's payroll, and all the Putinophobes said it would be. Today, Russian television is so tightly controlled that, with the occasional exception of NTV, it makes even American television seem halfway independent.

The effect of the attack on Gusinsky was bad -- Putin got his first taste of blood, and it tasted sweet. He won -- why tolerate any criticism if you don't HAVE to anymore?

If there's one really loathsome trend in Russia during the Putin era, it's that more and more Russians are becoming moralistic and delusional in a way I don't recall during the 90's. Then, Russians were stripped of moral delusions and personal delusions. Like all this elitny chai shit, or the cheezisization of Russian television. People are starting to believe the lies again -- that they live in a normal Danish city and that everyone behaves Danishly. But they don't -- and the dissonance between what you see on the street, in the stores, on the metros, and the official reality that so many people are buying into in the Putin era, is starting to create a kind of collective brain tumor.

Getting back to Khodorkovsky, why is his arrest so bad if he and his counterpart Voloshin are so clearly unsympathetic? Why have such a broad range of truly independent-minded Russian journalists, from Yevgenia Albats and Yulia Latynina to our own Edward Limonov, denounced his arrest?

I think that the academic, Olga Kryshtanovskaya's analysis says it best: "In the absence of a strong political opposition, businessmen are one of the few forces capable of resisting the onset of a neo-authoritarianism. Russia has handed big business the unusual role of providing some form of checks and balances."

She published that on July 2nd. On July 3rd, Platon Lebedev was arrested, and Khodorkovsky and the big business lobby he led were essentially destroyed.

As bad as it was having to rely on big business for freedom, without them, it's going to be worse.

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