WASHINGTON, Oct. 10 (UPI) -- Mikhail Khodorkovsky, chairman and CEO of the Russian oil company Yukos, about to be merged with Sibneft to form Russia's largest oil conglomerate, spoke at the Carnegie Institute for International Peace about Russia's need for a civil society. His presentation gave a fascinating glimpse into the twilight world of Russian top politics and business.
Khodorkovsky's purpose in speaking was to dramatize his work in pushing Russia towards a "civil society" in which prosecutors are independent, judges are incorruptible and the law is clear -- this is presumably why he spoke at Carnegie rather than one of the more business-oriented "think tanks" such as the American Enterprise Institute. Currently, as is well known, Russia is far from this state. One of Khodorkovsky's partners and a key employee have been held in jail for three months, and on Thursday itself both their houses were searched by the Russian authorities in a "brutish fashion." All court hearings have so far been heard in camera, and representatives of the Yukos executives have been put on oath not to reveal the charges against them, so they remain in ignorance of what they are accused.
Khodorkovsky believes that the prosecutions are not the work of president Vladimir Putin himself, but of senior "old guard" figures within the Procurator's office, whose methods have changed little in Russia's transition to democracy.
Khodorkovsky explained to the audience that the transition to a civil society is of enormous importance to Russian "Big Business" since it is the most internationally oriented sector of Russian life, and hence must itself be transparent and governed by national and international legal norms. While some years ago illegal methods were in use by both business and government, now business has to eschew them, and so they give government an unfair advantage.
On the business side, Khodorkovsky expressed enthusiasm at Thursday's decision by Moodies Investment Services to raise Russian debt to an investment grade rating, because it will reduce Russia's cost of debt capital, and should further increase the enthusiasm of foreign investors to put money into the country.
In response to my question as to why he would want to sell 40 percent of Yukos/Sibneft to Exxon Mobil, as has been reported in the international press, Khodorkovsky responded that Exxon Mobil, not Yukos, had gone to the Russian Presidency to ask permission to make such an investment, and that their action did not necessarily mean a deal would happen. I drew the conclusion (I think correctly) that an Exxon Mobil investment in Yukos at the 40 percent level, which gave Exxon Mobil effective control, would be most unlikely so long as Khodorkovsky was chairman.
Khodorkovsky clearly benefits from U.S. support in his struggles with the Putin administration. As the Vladimir Gusinsky and Boris Berezovsky cases have shown, a Russian oligarch who is seen in the West as simply a symbol of ill-acquired wealth is an easy victim if he opposes Putin, whereas Khodorkovsky, who has made Yukos highly Westernised, in terms of transparency and accounting practices, with a very substantial block of Western shareholders and is well known in the United States, is much more difficult for Putin to suppress if he wants to. Khodorkovsky in any case denies political ambition "70 percent of Russians in opinion polls say they hate oligarchs more than any other class, so how could I get elected?"
The early stages of transition to democracy are highly unstable, as demonstrated by the Russian people's views when opinion polls are taken. Putin almost certainly does not intend to seize Yukos, hang Khodorkovsky, nationalize all the foreign investment in Russia and invade Alaska, citing the "Crime of 1867" but he'd very likely win a thumping majority in next March's elections if he did. Accordingly, it is probably in the West's interest to support independent sources of power in Russia, such as Khodorkovsky, who are, whatever their failings, without question extraordinarily capable international businessmen.