Stephen Cohen on Khodorkovsky

Louis Proyect lnp3 at
Fri Nov 7 07:25:23 MST 2003

Nation Magazine, November 6, 2003

The Struggle for Russia
by Stephen F. Cohen

The arrest last month of Mikhail Khodorkovsky, the principal owner of
Russia's biggest oil company, Yukos, and the richest of the country's
seventeen state-anointed billionaire oligarchs, on charges of fraud and
tax evasion has put Russia back in the forefront of US media attention.
But is the story being reported the full, or essential, one?

It's being told as follows. Although Khodorkovsky, like all of Russia's
"wealthy businessmen," acquired his company (currently valued at roughly
$45 billion) at little if any cost to himself through "murky" insider
dealings in the 1990s, when the enormous natural resources of the former
Soviet state were being privatized under then-President Boris Yeltsin,
he has since transformed Yukos into a model for a new capitalist,
democratic Russia--"transparent," exceedingly profitable, even
philanthropic. So much so that it has helped fuel a Russian "economic
rebound" while becoming a potential source of oil for the United States.

Unlike other, less "clean" oligarchs, the story continues, Khodorkovsky
is being persecuted by President Vladimir Putin chiefly because the oil
baron became active in Russia's democratic politics, funding opposition
parties in next month's parliamentary elections and even aspiring to the
presidency. To crush Khodorkovsky and make an example of him, Putin is
relying on a Kremlin faction he has recruited largely from the KGB,
where he began his own career, which wants Yukos's wealth for itself.
The result will therefore be a grievous blow to Russia's "booming
economy" and democracy, replacing free-market-oriented "liberal
oligarchs" with much worse and less efficient ones and driving away
needed foreign investment.

Some elements of this story, which relies very heavily on Moscow sources
associated with the "liberal oligarchs," are plausible, but others are
not. Democracy in Russia has been failing ever since Yeltsin made
oligarchical privatization possible by destroying an elected parliament
in 1993, and neither side is interested in truly reviving it; the
oligarchs are zealous monopolists, not free-market reformers, and
Western investors interested in Russia's huge oil reserves have already
indicated that they care about official guarantees of the contracts, not
who signs them; Putin now controls elections sufficiently to get
substantially the legislature he wants; and no one of Jewish origin, as
are Khodorkovsky and most of the other oligarchs, can be elected
president of Russia. Above all, however, the prevailing media account
omits the essential background and context.

Privatization--or "piratization," as it is often called in Russia--did
not take place in an economic or social vacuum. It was accompanied in
the 1990s by the worst economic depression of modern times and the
impoverishment of a great many Russians, probably the majority of them.
In the process, it created the oligarchical economic system that exists
today. In 2000, Yeltsin-era oligarchs, fearfully aware that they were
loathed by most Russians--they still refer to them contemptuously as a
"Communist populace"--and that they lacked any real legal legitimacy,
put Putin in the Kremlin to be a praetorian president safeguarding the
system, its creators and its beneficiaries in business, politics, the
media and even intellectual circles.


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