The rise and fall of Mikhail Khodorkovsky

Does a personal vendetta lie behind the imprisonment of Russia’s once-richest oligarch, Mikhail Khodorkovsky? Was the Kremlin the real power behind the murder of the mayor of Nefteyugansk, for which Khodorkovsky is being punished? Jeremy Putley reviews a well-researched new book by Martin Sixsmith

This book relates the story of an honourable man, and how it came about that he was defeated and lost everything because he was hated and feared by the leader of a major world power who personally subverted the supreme authority of the state to overcome him. It illustrates both the risks of conducting business and the extraordinary realities of politics in Russia today.

Khodorkovsky on trial

Yukos was once Russia’s largest, best managed, most productive and successful oil company. Its destruction, and the prosecution and imprisonment of Mikhail Khodorkovsky, together with other Yukos executives including his long-term business partner Platon Lebedev, the company’s head of security Alexei Pichugin (tried in camera on murder charges), and many others not referred to by name in this book, constituted the most flagrant abuse of authority by a Russian president since, at least, the treatment of dissidents and the banishment of Sakharov in 1980.

Driven from the start by President Vladimir Putin, the prosecution’s motivations were Putin’s personal animosity towards Khodorkovsky, and his fear that Russia was losing its control over its most important natural resource – oil. All of the jailed Yukos personnel must be considered to merit the status of political prisoners, but the main objective of the legal action mounted by the state against Yukos has been to bring down Khodorkovsky personally. The belief that the action was politically motivated underlies motions in the US senate and house of representatives, and in the parliaments of Germany and Italy; a statement by the president of the European parliament; findings reported by the European parliament’s rapporteur; testimony in statements made before the US senate by a British lawyer on behalf of Yukos shareholders, and by former Yukos president Steven Theede; judgments in extradition cases heard in the Bow Street Magistrates’ court, and a judgment in the Swiss Federal Tribunal in Lausanne. There is no instance of a reputable examination into the matter concluding otherwise; all the verdicts are unanimous.

To quote Khodorkovsky himself: “It is not in the courtroom that my fate will be decided. Everyone knows that. There is no doubt that the whole Yukos affair has been politically motivated from the start ... to undermine support for an independent opposition. If the courts were independent, my trial would have been cancelled before it started. But Russia has no independent courts!”

This was, though, an assault of such intensity that it could better be described as a personal vendetta. It seems to have had its origins in a televised meeting with President Putin in February 2003. As that meeting is described by Sixsmith, Putin had summoned Russia’s leading businessmen to discuss the subject of corruption with Kremlin officials. In his presentation Khodorkovsky produced slides reporting opinion poll findings that 49 per cent of Russians believed corruption had spread to the majority of state officials including the highest levels of federal power; and that 32 per cent of Russians believed that the Russian leadership would like to tackle corruption but was powerless to do so, 29 per cent believed the leadership could tackle corruption but chose not to do so, and 21 per cent believed it neither wished nor was able to do so. Another slide “showed that 72 per cent of Russians believed it was a waste of time to pursue a complaint through the country’s legal system because judges were institutionally corrupt and they could not afford the bribes needed to get justice.”

Khodorkovsky next proceeded to describe a recent purchase of an oil extraction facility by the state oil company for which a suspiciously high price had been paid. The inference was that “the excess payment had gone into the pockets of Putin and his Kremlin cronies” in an instance of corruption at the very heart of the Russian state.The amount paid for the oil extraction facility was in the region of $550 million more than it was worth. Khodorkovsky described the transaction as money laundering – an offence he was later to find himself being accused of in court proceedings.

This meeting was the trigger for the assault on Yukos later that year. In exposing the corruption at the apex of the Russian political hierarchy Khodorkovsky had initiated a fight he would not be able to win. The machiavellian power politics of modern Russia is an inherently dangerous game in which the risk is greatly increased by the enormous wealth which can be acquired by its participants. Sixsmith quotes a former member of the siloviki, the inner circle at the centre of government:

“I estimate the assets controlled effectively by Vladimir Putin at the level of at least $40 billion .... There are hundreds of people inside the Russian elite who can confirm the figures and tell you much more about Putin’s business ....”

Such allegations are denied on Putin’s behalf, although he has not yet seen fit to defend himself in court against accusations of self-enrichment – in any event, it might be assumed, a successful court action would not be likely to alter general perceptions.

Towards the end of the book there is a somewhat dramatic disclosure by Sixsmith of what may have been the real truth behind the murder of the mayor of Nefteyugansk – a murder for which the Yukos security chief is now in prison following a trial behind closed doors (which is to say, a pretence of a trial). According to the sworn testimony of the late Alexander Litvinenko in 2006, he had been shown a video of the hitman, a member of a crime gang, receiving payment of $40,000 from an FSB officer, Alexei Antropov, and instructions to carry out the murder. Antropov was personally known to Litvinenko, who identified him as a commanding officer of the FSB’s Third Department. If this is true, it follows that – contrary to Mr Putin’s televised suggestion as recently as December 2009 – the murder was not on the initiative of the company’s main shareholder, Mikhail Khodorkovsky, but was actually carried out by agents of the Kremlin. According to Sixsmith, “suspicions were later voiced that Litvinenko’s willingness to spill the beans about the Nefteyugansk killings may have contributed to the Kremlin’s motives to have him killed.”

The book’s title, “Putin’s Oil”, is naggingly wrong. The oil in question once belonged to the Yukos company, now in ruins. As the book recounts in much detail, the ownership rights to that oil were stolen and subsequently acquired by other Russian companies. The oil was never Putin’s. In going for a catchy title the author has shown the propensity for careless characterisation which spoils an otherwise excellently written and well-researched book. Mikhail Khodorkovsky, who is really the book’s subject, has imagined conversations, which attribute to him invented – and, I think, false – character traits and impart a trashy quality to some of the writing. Sixsmith uses techniques of fiction in pursuit of drama in what is already a sufficiently interesting factual narrative, and as a result he misdescribes his book’s main protagonist. This is a pity.

Another problem with the book is that, like other commentaries on the life and times of Mikhail Khodorkovsky, it sometimes makes allegations against him relating to the early part of his career that he is not in a position to refute. It is objectionable, in particular, that the author quotes allegations by a person who speaks only on condition of anonymity as “a leading oil industry analyst”. There are different opinions regarding Khodorkovsky’s conduct during the nineties, and his situation surely entitles him to the benefit of those which are uncritical. For example, in respect of the allegation of greenmailing made against Yukos by Sixsmith’s anonymous “analyst”, there is an as-yet unpublished book by another author, Jonathan Ellis, whose interpretation of the treatment of minority shareholders is very different. What Sixsmith chooses to describe as “a cutthroat battle for supremacy with some of the investors who held minority stakes in Yukos”, Ellis treats in considerably more detail as a case of a predatory American greenmailer buying up shares in subsidiaries in order to be able to sell them on to Yukos and Sibneft for highly inflated prices, and engaging in “blocking tactics making it impossible for Yukos to press forward with the essential consolidation of the company and create the integrated oil company that had been envisaged.” Eventually, in December 1999, according to contemporary press reports, an agreement was reached that Yukos would pay the American greenmailer $130 million for shares which, at that time, had a market value of $50 million. That is not to say that all the Yukos conduct was invariably ethical. What can be said, however – and has been said by Khodorkovsky – is that as there were then no applicable laws, no laws were broken. 

The second politically-motivated trial of Mikhail Khodorkovsky and Platon Lebedev on newly invented charges is now approaching the end of its first year. No one believes its purpose is other than to find the men guilty in order to ensure that they remain in prison, thereby compounding the injustice done to them at their first trial. This depressing spectacle is continuing evidence that the Russian judicial system has been subverted. The implausible charges against Khodorkovsky and Lebedev in the present trial include the theft of all the oil produced by Yukos in a six-year period. This is an inherently absurd accusation: if the oil had been stolen, Yukos could not have been the most profitable oil company in Russia and the country’s largest tax-payer which, according to its reputably audited accounts, it was.

There is no political opposition worth the name – and therefore no true democracy – in Russia today. Amongst the destroyed remains of Yukos lie also the ruins of the human rights of numberless innocent Russians who are wasting away in the foul conditions of the Russian prison system. It seems that only after Prime Minister Putin leaves the scene will it be possible to investigate, and perhaps to remedy, the abuses of the legal system which have occurred during his period in high office.

There is one possible alternative. Under Article 89 of the Russian constitution the president has the presidential pardon available to him for use at his discretion – the constitution does not restrict its use to cases of prisoners who plead guilty – and considering the realities of Russia’s judicial system, in which more than 95 per cent of cases result in convictions, by any objective consideration it is his pressing and urgent duty to use it.

President Dmitry Medvedev, elected to the senior government position in 2008 as Putin’s successor, could now arrange – as necessary for the honour and international standing of his country – for independent judicial reviews. The case of the Yukos prisoners would be a good place to start. Remembering the decision by President Gorbachev to free Academician Andrei Sakharov from internal exile in 1986, could President Medvedev show that he possesses the necessary qualities to take such an initiative? Victims of Russia’s miscarriages of justice can only wait in hope.

Putin's Oil - cover

Putin’s Oil: The Yukos Affair and the Struggle for Russia,  by Martin Sixsmith, Continuum International Publishing Group, 2010

About the author

Jeremy Putley works for an investment company in Yorkshire, England, and writes on political theory, Chechnya and modern Russian history. His work includes “The Moral Vacuum and the American Constitution”, Political Quarterly, 1997. He has lived in the US, Australia, New Zealand, the Middle East and Moldova.

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Read On

Khodorkovsky & Lebedev Communications Center, http://www.khodorkovskycenter.com/

The Oligarchs. The Wealth and Power in the new Russia, by David Hoffman, Public Affairs, 2002, 567 pages

Petrostate: Putin, Power, and the New Russia (Paperback), by Marshall Goldman, Oxford University Press, USA; With a New Preface edition (January 20, 2010), 264 pages