Russia's Khodorkovsky Mistake

Moscow has damaged its image and its business climate by keeping the Yukos tycoon in jail.

On October 25, it will be ten years since a Russian SWAT team arrested oil tycoon Mikhail Khodorkovsky in a Siberian airport. It was a watershed moment for Russia, defining the Putin era as one in which the Russian oligarchs were subjugated to the Kremlin.

Prior to Khodorkovsky’s arrest, the Kremlin had limited itself to deposing media oligarchs. It had, for example, forced Vladimir Gusinsky and the late Boris Berezovsky to give the state their politically critical assets in and allowed them to leave the country. But Khodorkovsky was different. Three years after ensconcing themselves in the Kremlin, the new masters decided they wanted it all: money and power. And on Oct. 25, 2003, they took it. Because they could.

Khodorkovsky was a founder of Yukos, the most modern energy company in Russia. He had enriched the industry by importing Western technology, management, accounting—even international managers—for the Yukos building and its board.

Yukos shares skyrocketed after the company became transparent through the introduction of Western accounting procedures. Exxon and Chevron raced to buy half of the company – supposedly, with the Kremlin’s blessing. In 2003, Yukos was in the process of merging with Sibneft—a deal that would have created the world’s largest publicly traded oil company in terms of reserve barrels.

And then it all fell apart. Mikhail Khodorkovsky and his partner Platon Lebedev were arrested in 2003. In 2005 they were sentenced to eight years in prison for tax evasion. The prison term was extended to 14 years after a second sentence (imposed in 2010) for “stealing” all the oil produced by their company – even though that oil had been exported through the state-run pipeline company Transneft.

If no additional criminal case is opened against Khodorkovsky (talk about triple jeopardy), he may be released next August. Optimists estimate the chances of his release to be 50-50.

If the rule of law prevailed in Russia, both Khodorkovsky trials would have ended in acquittal. Reportedly, the judges’ and investigators’ families were threatened with harm unless guilty verdicts were handed down. As in the 1930s, witnesses or former colleagues were badly beaten or denied medical care for AIDS if they refused to testify against their former boss.

And when political powers intervene, there are no hopes for a fair trial in Russia. Not for Khodorkovsky, and not for tens of thousands of others. Nowadays, Russian courts acquit less than one percent of all defendants brought to the dock. Even under Stalin, the numbers were higher! And herein lies Russia’s tragedy of the twenty-first century.

Although Khodorkovsky was arrested on charges of tax evasion, he was guilty of something else entirely. His real “crime” was the desire to be politically independent of the Kremlin kleptocracy. As for the taxes, Yukos most certainly did pay them, as documented by PricewaterHouseCooper, one of the world’s largest audit firms. And the Russian tax service officially thanked Khodorkovsky for his tax payments – six months before his arrest.

Lawless courts had long been a bane of Russia --especially its businesspeople. But with Khodorkovsky’s arrest in 2003, the state became the biggest corporate raider of all. Since then, both political expression and the business climate in Russia have been stifled. The Khodorkovsky verdict locked in the Russian court system as a tool of political suppression—just as it was under the czars and the commissars.

Khodorkovsky’s jail sentence has become a tragic mistake for Russia. It has damaged the country’s image as well as its business climate. The two consecutive prison terms—a common practice under Stalin—resembles a vendetta more than a well-thought-through carriage of justice.

Had the disgraced oligarch followed the example of his colleagues and fled Russia, he would be enjoying a lavish lifestyle—and most probably be forgotten, too. But Khodorkovsky, knowing what the Kremlin had in store for him, opted to stand up to his foes in an unfair trial.

It was a very Russian thing to do – to martyr himself. “I want to be a free man in a free country,” Khodorkovsky said. He was naïve.

By jailing Khodorkovsky, the Russian authorities made him an historic figure. Today, he symbolizes the fight against corruption and graft and and a harsh and unfair judicial system. His fate highlights the collapse of the rule of law. His jail term has cost the country tens of billions of investment dollars. The sight of an oligarch-turned-political-prisoner sewing mittens in a prison camp told the world a lot about a country that treats one of its most talented sons like this.

Today, Amnesty International considers Khodorkovsky a prisoner of conscience; others compare him to Nelson Mandela. The European parliament passes resolutions in his cause, and composers dedicate symphonies to him.

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