Is it the end of the era of "oligarch capitalism," or rather a maneuver by Russia's bureaucratic elite to tighten their hold over a system that has served them well? The jury is still out on what the jailing of oil chief Mikhail Khodorkovsky means for Russia.
Is it the end of the era of "oligarch capitalism," or rather a maneuver by Russia's bureaucratic elite to tighten their hold over a system that has served them well? The jury is still out on what the jailing of oil chief Mikhail Khodorkovsky means for Russia. The official reasons for the arrest at gunpoint of the former Yukos chief executive -- tax evasion and massive fraud -- apply equally well to a score of other "oligarchs," or top tycoons, who grew fabulously wealthy virtually overnight in the mid-1990s and who remain untroubled. And so the question remains: why Khodorkovsky? For some, the former oil chief -- he resigned from Yukos after his October 25 arrest -- is not just the richest but also the most representative of the oligarchs, the man most capable of using his money to buy influence in parliament to block legislation that runs counter to oil interests. Supporters of a strong state believe the power of the "super-bosses" must be curbed and the oil revenues brought under public control if President Vladimir Putin is to achieve his objective, declared earlier this year, of doubling gross domestic product within 10 years.
The oligarchs have "failed to alleviate Russia's most profound problems," Stephen Cohen, a US specialist, wrote in a commentary published in Russia. "After a decade, and despite a purported 'economic boom,' most of the country's essential industrial, agricultural and social infrastructure is still starved for investment and disintegrating." For Cohen, "the only solution is a new economic course that uses the oligarchs' enormous profits from the country's natural resources to rescue and develop the rest of the nation." Advocates of this line argue that however regrettable the circumstances of Khodorkovsky's arrest -- the selective justice, the dubious legality -- the move was a necessary step towards saving the economy. They gloss over the indications that the Russian economy has been booming for the past five years, with a fall in the number of people living below the poverty line, a sharp rise in government income through taxes, and increases in private investment and consumption. Their many opponents however take a much dimmer view of the Kremlin's conduct over the Yukos affair. Russian capitalism, analyst Andrei Piontkovsky said, "is a binary relationship between the authorities and money." Russia's top entrepreneurs flourish "thanks to their political relations, and the bureaucracy feeds off its profitable relations with big business," he said. Among the beneficiaries of this "exchange of blood" was Khodorkovsky, the analyst noted. The oil chief, however, understood that if Russian industry was to develop further and attract foreign investment, the era of "robber baron capitalism" had to be scrapped in favor of Western-style management and transparency. He began to practice what he preached at Yukos, and the company's fortunes soared. "This made the bureaucrat-businessman dependency redundant," Piontkovsky said. Moreover in a statement to Putin last February in which he declared: "Mister President, your officials are blackmailers and thieves," Khodorkovsky effectively "sent a message that Russian businessmen wanted new transparent, competitive, legal rules," he noted.
Putin himself was angered by Khodorkovsky's forthrightness, and many in the bureaucracy, and their armed wing in the security services, felt it was time to act. "If an entrepreneur starts acting like a modern businessman, the bureaucrats who want things to remain unchanged are going to turn the system against him," said Yury Korgonyuk, of the Indem Institute, in his analysis of the Yukos affair. According to bank sources, the ruling Kremlin set last year asked Khodorkovsky to hand over 15 percent of Yukos shares. "Unlike the other oligarchs, he refused," a Moscow banker said. And it was after this incident that the Yukos chief began to take a more active interest in politics, deciding to fund liberal opposition parties and strengthen his ties with US businessmen to consolidate his support.
So who's to win in this affair? It depends on the view taken on the situation. One things for sure, oligarch capitalism's best days are long gone.