| The chaos of the Yeltsin era handed economic power to
a handful of Russian
oligarchs. Can Vladimir Putin, the hard-edged ex-KGB lawman, bring order
and accountability? Or is he intent on grabbing all the power for himself?
THE Yukos affair, Russian businessmen say, could cause a bigger crash
than
the collapse of the rouble in 1998. Foreign investors see it as a litmus
test of Russian good faith. Kremlinologists say it marks a watershed for
President Putin. Western leaders believe it could destroy years of economic
reform and political liberalisation.
Why does the arrest of Russia's wealthiest magnate and the subsequent
turmoil in its biggest oil company matter so much? Why has it caused such
convulsions in the Kremlin, including the resignation of Aleksandr Voloshin
on Thursday as Chief of Staff and his replacement by Dmitry Medvedev?
And
why did Mr Putin feel obliged to call in Western bankers to assure them
that his Government was not turning the clock back or trying to
renationalise Russia's private economy by stealth?
To understand the importance of this, one has to look at Russia's chaotic
and botched privatisation programme, the vast influence of the "oligarchs"
who have emerged from it and the political chaos of the later Yeltsin
years
that threatened not only law and order in Russia but even the authority
of
the State itself.
No privatisation was as important as that of the oil industry, Russia's
biggest export sector by far. It was split into many smaller companies,
with the rump of the old state industry becoming Lukoil. Russian
entrepreneurs took full advantage of the reforms, establishing their own
oil ventures.
Yukos was the brainchild of Mikhail Khodorkovsky, a dynamic and ambitious
mathematician-turned-banker in his early 30s, who bought the oil company
in
1995 for $309 million (?182 million) at a privatisation auction run by
a
bank he secretly owned through offshore companies.
The details of the subsequent transactions are murky, and would certainly
not stand up to scrutiny by Western market investigators. Yukos acquired
a
reputation as a cowboy company, and Mr Khodorkovsky earned a reputation
as
an unscrupulous operator. But once Yukos had become the second-largest
oil
company through dubious mergers and acquisitions of smaller, weaker
companies, it began to change.
It became more efficient and more accountable. Mr Khodorkovsky embraced
transparency, brought foreigners on to the board and used Yukos' wealth
to
sponsor greater access to the internet, social causes and cultural
foundations. In short, Yukos made itself respectable and became a favourite
for Western investors, as much for the example it set as for the deals
it
was ready to negotiate abroad.
Mr Khodorkovsky was an enthusiastic early supporter of the Putin reforms.
He called for clearer tax laws, more impartial justice and a proper
investment framework. He met the President from time to time, and became
a
familiar figure among magnates overseas. By last year, he had become
Russia's richest man, worth about $8 billion; by October, after the
proposed merger with a smaller oil company Sibneft was approved, Yukos
had
become the country's biggest oil company, overtaking Lukoil, and the
fourth-largest private oil producer in the world.
Somewhere along the way, however, Mr Khodorkovsky and the Kremlin fell
out.
He began to complain that the pace and scope of reform was falling short.
He criticised the conduct of the war in Chechnya. Yukos gave money to
opposition parties, including those preparing to field candidates to stand
against the Kremlin-backed Unity party in the December elections. And
he
himself hinted that he was ready to stand as a presidential candidate
in
four years' time.
All this infuriated the Kremlin. Mr Putin does not take kindly to any
criticism of the Chechnya operations; he has the authoritarian instincts
of
his KGB background to political opposition; and many believe he would
like
to amend the law to stand for a third presidential term - when Mr
Khodorkovsky would be a rival with enormous wealth.
Curbing the oligarchs was one of Mr Putin's first moves on coming to
power,
including two, Boris Berezovsky and Vladimir Gusinsky, who were most
closely associated with the Yeltsin "family" of cronies and
supported Mr
Putin's own election. The curb eventually forced the two into exile. It
was
intended to send the message that Mr Putin was under an obligation to
no
one. It was extremely popular among ordinary Russians, who saw all the
oligarchs as a class of plunderers above the law.
Russians believe that on coming to power Mr Putin made a deal with the
leading businessmen: they could keep their gains, however ill-gotten,
as
long as they did not interfere in politics. Mr Putin saw that it was the
nexus between politics and private business in the Yeltsin era that had
turned the country into a discredited oligarchy.
Many Russians believe that the investigation into Yukos's tax affairs
and
its murky past, which began four months ago with the arrest of Platon
Lebedev, a key Yukos shareholder, and the thorough searching of all offices
and records, has been motivated as much to cut down the powerful remaining
oligarchs as to send a message to other businessmen: keep out of politics.
But while the Yukos affair has caused turmoil among investors in the
Russian markets, the "crisis" gets brief mention on the TV news.
Financial
newspapers such as Kommersant report the case in huge detail but people
at
large do not fret much about the arrest of Russia's wealthiest man. They
probably think he is getting his just desserts
See also:
YUKOS
case
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