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Operation MBK

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How does one explain Mikhail B. Khodorkovsky’s (MBK) unexpected release from prison? President Putin no longer sees him as a threat? President Putin is losing his grip? No, Operation MBK was a classic power play…

Fabian Burkhardt
24 January 2014

How does one explain Mikhail B. Khodorkovsky’s (MBK) unexpected release from prison? President Putin no longer sees him as a threat? President Putin is losing his grip? Enquiring into Germany’s role can help. Alexander Rahr, Research Director of the Germany-Russia Forum and Hans-Dietrich Genscher’s adviser, sold his narrative well: Khodorkovsky’s release was a success of ‘Germany’s secret diplomacy’. Other analysts concluded that, yes, there was a German connection, but that MBK’s release cannot be attributed solely to Germany’s unique back-channel given that Genscher did not have much leverage over Putin. Furthermore, say the Russia watchers, the explanations are, in fact, to be found deep inside Russia’s networked political system – the ‘sistema,’ – and most likely have more to do with ongoing legal and financial claims between Yukos, Rosneft and the Russian state. In short, say the experts, MBK was a bargaining chip, played without formal, legally binding obligations, but ‘po ponyatiyam’ (by the codes of the sistema). But that, I would argue, still takes us back to the German connection; and to understand that, we have to go back in time.

In 1994 the deputy mayor of St Petersburg asked Dresdner Bank for a favour.

‘Better a hundred friends than a hundred roubles’

Some twenty years ago, in 1994, the deputy mayor of St Petersburg asked Dresdner Bank, which was among the first foreign banks to open an office in Russia’s northern capital after the collapse of the Soviet Union, for a favour: his wife had been injured in a car accident, and he wanted to have her treated in a German clinic. Dresdner agreed ‘for humanitarian reasons,’ flew her out to Bad Homburg, and even covered some of the rehabilitation costs. The deputy mayor was Vladimir Putin, and the banker Matthias Warnig, a former Stasi spy who understood the value of personal ties. In 2012, Forbes Russia dubbed Warnig, Putin’s ‘most reliable economist’ and one of the ‘ten key figures’ in Putin’s power vertical, with board and management positions in Nord Stream, Rosneft, Transneft, Gazprom Schweiz and UC Rusal, indeed a remarkable achievement for a foreigner in a Russia that is usually very protective of its strategic industries. Forbes Russia credibly argues that Warnig sailed through the test of courage posed by the Russian government in 2004: he agreed that Dresdner would take on the risky job of valuing Yuganskneftegaz, the gem among Yukos’ assets, which was then sold to the highest bidder.

By executive decree the Russian president had ordered that the Cessna pilots did not need a visa.

Twenty years later, just before the Christmas holidays in December 2013, Ulrich Bettermann, a German-born naturalized Swiss citizen, permanent member of the World Economic Forum in Davos, and owner of the medium-sized West German enterprise OBO Bettermann, readily agreed to provide a Cessna aircraft to airlift Mikhail Khodorkovsky out of St Petersburg to Berlin. By executive decree the Russian president had ordered that the Cessna pilots did not need a visa. Bettermann would provide the plane free of charge – why, he didn't say – and Hans-Dietrich Genscher publicly explained that he had got involved ‘for humanitarian reasons,’ because, he said, Alexandra Hildebrandt, the head of the Berlin Wall Museum, had asked him for help more than two years earlier.

The German Connection

Most of the early media coverage focused on Genscher, with his clandestine efforts and secretive meetings. However, a closer look at the business interests of Ulrich Bettermann can yield some revealing insights. The entrepreneur met MBK at Berlin’s Hotel Adlon at an event organized by the German Council on Foreign Relations (DGAP) in 2003, back when Genscher was the Council’s president. But Bettermann also met Putin, at Gerhard Schröder’s 60th birthday party in 2004.

OBO Bettermann manufactures electrical installation materials, and is building a new plant in Russia. On the website of its Russian subsidiary OBOcom one can learn that the firm also supplies the oil and gas industry. At first glance, the site is not very forthcoming, stating only that it has business partners such as an ‘oil refinery in Tomsk’. Yet, after looking more closely into the ownership structure of OBO’s partners one comes across almost all of Russia’s energy majors.

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At least one company that OBO Bettermann has dealings with was formerly a part of Yukos: the Kuibyshevsky oil refinery, now owned by Samaraneftegaz, a subsidiary of Rosneft. There are other companies besides Rosneft, which have swallowed up bits and pieces of Yukos, such as Gazprom, Gazprom Neft, Russneft, but Samaraneftegaz is most interesting because Yukos Capital is in the midst of a legal battle to secure outstanding payments ($186 millon) from Rosneft’s subsidiary.

We can assume that Bettermann, quite naturally, is a businessman interested in maximising his profits. Thus, he would not have assisted in this operation if providing a plane had harmed his Russian business interests. He must have surmised that his clients such as Rosneft, Gazprom or Transneft would be at least neutral, if not supportive in their view on the release of MBK.

This supposition makes it very unlikely that it was the West, and in particular Germany, that successfully pressured Putin to set MBK free; rather, this was a solution for which Putin, as sistema’s supreme arbiter, could secure the tacit approval of all major interested parties in Russia, and perhaps MBK himself who stated very soon after his arrival in Germany that he would not be going into Russian politics. The German connection was what allowed Operation MBK to be carried out so smoothly.

The spider’s web

The graph below shows the spider web of German-Russian politico-economic relations, from which operatives were selected on the basis of their suitability for Operation MBK.

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One can clearly see the close connection between the operatives (in red) that either directly or indirectly profited from the dismantling of Yukos (in green). This, again, makes the ‘pressure theory’ for Operation MBK very unlikely seeing how Genscher and Rahr (close allies of the Committee on Eastern European Economic Relations – in the graph above, ‘Eastern Committee’) together with Bettermann (with his own business in Russia) would not, even with the blessing of Chancellor Merkel, exert pressure or even lobby for Khodovorsky’s release if this had damaged their own interests and/or those of their network ties.

What a bitter irony of history that Khodorkovsky was flown to Berlin in a plane belonging to a man whose firm delivers material to an expropriated Yukos subsidiary.

What a bitter irony of history that Khodorkovsky was flown to Berlin in a plane belonging to a man whose firm delivers material to an expropriated Yukos subsidiary.

Who benefited from Operation MBK?

Who benefited from Operation MBK? The plea for clemency was clearly facilitated by the business-friendly elder statesman Genscher and his adviser Alexander Rahr. Both are prominent members of the establishment that is dubbed ‘Russia empathisers’ in Germany, whose sympathetic view of Russia is opposed by the ‘Russia critics;’ and the two sides are far apart, as the table below shows:

Issue

Russia empathisers

(Schröder, Steinmeier, Erler, Rahr)

Russia critics

(Beck, Lau)

Diplomatic approach

Interest-based:

Favours state/elite.

 

Value-based:

Talks with both state/elite + opposition/society.

 

Eurasia

Customs/security union from Lisbon to Vladivostok; only with, not against Russia in the Eastern Neighborhood; Eurasian Union a viable alternative to EU, which has to be taken seriously; Russia will increasingly turn to China/ASEAN if EU continues value-based approach.

Russia as authoritarian centre in the region hindering the democratisation of Eastern partnership countries.

View on Russian regime/elections

Legitimate

Illegitimate

Putin and society

Putin is what society asks for (strong state, order, stability)

Putin a dictator; society (especially growing middle class, large cities) demands change.

Putin and ideology

An acceptable rightist Christian-conservative ideology.

No ideology, maximizing power and financial assets of Putin clan the only aim.

Putin and Russia’s image

The West’s coverage of Russia is biased and unfair.

Putin and his domestic/foreign policies preventing a better image of Russia to the world.

Khodorkovsky

Symbol of rogue capitalism of the 1990s; guilty at least of tax embezzlement.

Victim of the Russian judicial system; MBK used rogue methods in the 1990s, but completely changed in the 2000s, both before arrest and even more so in prison.

Could it be that Operation MBK, with its publicly well-sold narrative, gave ‘Russia empathisers’ both in Germany and the EU further arguments to push their policy agendas with regard to Russia?

The graph of ‘empathisers’ and ‘critics’ below shows that the centrality of the ‘empathisers’ (in red) is much higher than those of the ‘critics’ (in green) who are fairly isolated, suggesting the ‘empathisers’ are in a better position to influence policy.

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This is much more than an abstruse, academic position: After MBK’s release, Angela Merkel has once again spoken in favour of a strategic partnership with Russia. In the forthcoming election period the ruling coalition’s new foreign minister Steinmeier will surely try to reinvigorate the ‘partnership for modernisation.’ Moreover, the Russia ‘critic’ Schockenhoff, the foreign ministry’s coordinator for German-Russian relations, was replaced by Gernot Erler, a protégé of Steinmeier, and a board member of the influential Eastern Committee mentioned above, who last year called for an end to ‘Russia bashing.’ Others, however, are more cautious in their assessment. Hans-Henning Schröder of the German Institute for International and Security Affairs does not expect a major overhaul of Germany’s Russia policy, and says the basic tendency will remain unaltered.

Putin’s European policy has always been to take advantage of the inability of the EU member states to talk as one.

Image-wise, Russia has undoubtedly benefited from no longer having Khodorkovsky languishing in a cell. Furthermore, Germany is important to the Putin government because, according to Gregory Feifer, it views Germany as the ‘beachhead for its strategy across the continent.’ Operation MBK strengthened the kind of bilateralism Russia tends to favour in EU-Russia relations. Putin’s European policy has always been to take advantage of the inability of the EU member states to talk as one.

Absolution

In an interview with Bloomberg Businessweek Khodorkovsky was asked what he thinks of BP, which now owns 20 percent of Rosneft (which benefited most from the dismemberment of Yukos)? BP, he said, ‘acted within the boundaries of the law in buying a stake in a company built on Yukos’s expropriated assets. It’s another matter whether it was ethical.’

This almost saintly absolution given by Khodorkovsky to the Putin regime and its beneficiaries might be seen as unexpected, especially among ‘Russia critics.’ But is it? Perhaps it is not so much that MBK has found God, as that he understands only too well the trade-off between values and interests. Operation MBK was not about clemency, it was about realpolitik.

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