| Mr. Smith is Moscow bureau chief for Dow Jones Newswires
MOSCOW -- The arrest and detention of Russian oligarch Mikhail
Khodorkovsky's is not the death knell for Russian assets, although they
are
obviously in for a hairy couple of days at the very least.
Whatever the intention behind the attack on the Yukos CEO and his
associates, its success has always depended on isolating its victims and
on
persuading possible allies, fellow-oligarchs like Vladimir Potanin, Mikhail
Fridman and Oleg Deripaska, that their empires aren't threatened as long
as
they play by whatever rules were agreed behind closed doors at the start
of
Mr. Putin's presidency.
Despite Yukos's best efforts to the contrary, all the evidence to date
suggests that this approach has succeeded and will be pursued further.
While others have expressed their concern at the prosecutor's behavior,
no
other oligarch has stepped up to protest Mr. Khodorkovsky's innocence.
After the self-exile of Boris Berezovsky and fellow media tycoon Vladimir
Gusinsky, no other oligarch has lost his liberty or any of his assets,
despite the fact that most of them are signally sleazier and none has
done
half as much as Mr. Khodorkovsky to rehabilitate Russian business in the
eyes of the international community.
It would thus be hugely inconsistent for Vladimir Putin to usher in
a new
age of anarchy by directly taking on a united front of the country's most
powerful businessmen. To do so would be to undo -- only five months before
he faces a national election -- all he has done over the last four years
to
restore stability to a ravaged country. Re-election would still be assured,
but he could say goodbye to his much-prized target of doubling GDP by
2010.
Not one more dollar of Russian flight capital would ever be returned again.
Mr. Khodorkovsky's arrest and charging has obviously given the oligarchs
a
good scare, to judge by Anatoly Chubais's urgent plea on behalf of his
peers for fresh reassurances from the president. Indeed, that seems to
be
the point.
It appears that the tax evasion charges levelled at Mr. Khodorkovsky
are
based on documents that he prepared in the course of transferring his
wealth to legal structures from allegedly "gray" ones -- a paper
trail
which all oligarchs have now created in line with the pact they made with
Mr. Putin four years ago (widely interpreted as casting a blind eye on
past
misdemeanors in return for good future behavior). One could call this
a
breach of faith by Mr. Putin, but then, Mr. Khodorkovsky's detractors
would
say it was he who broke faith first, by supporting political parties beyond
the accepted limits.
As a means of keeping a close rein on a class of people whom Mr. Putin
chooses not to trust, it is a masterpiece. None of this justifies the
travesties of legal procedure that the country's law enforcement operatives
are committing almost daily. Whatever the reasons of the campaign against
Yukos, the mute acquiescence over months to one abuse of power after
another by the prosecutors will inevitably and rightly harm Russia's image
abroad. There is grotesqueness, familiar from Russia's Communist past,
to
the way in which one is led to believe that everyone at Yukos is a criminal
but nobody outside it is. Of all the criticisms levelled against Moody's
Investor Service for its premature upgrade of Russia to investment level,
none is more serious than the still near-complete absence of properly
functioning courts.
Still, as the presence of Yukos's peers in all kinds of countries
testifies, capital flows not to those countries with the best judicial
systems, but with the best returns. It is something that the rest of the
oligarchs will see clearly enough when the current storm settles.
See also:
YUKOS
case
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