As Mikhail Khodorkovsky celebrates another birthday in prison, IMR Research Associate Elizabeth Zolotukhina revisits his story and tries to answer a seemingly redundant question: why Khodorkovsky was singled out for arrest, trial, and a lengthy prison sentence.
Threats To the Regime
At the time of his arrest at the behest of the Kremlin on October 25, 2003, Mikhail Khodrokovsky was the wealthiest businessman in Russia with a net worth of approximately $8 billion, and Yukos was the country’s second largest producer of oil. Khodorkovsky belonged to a group of elite Russian businessmen who shared similar personal as well as professional backgrounds, government lobbying efforts, political aspirations, merger and acquisition plans, and even a common “perpetual sense of insecurity.” Yet only Khodorkovsky was arrested, tried, and jailed. Therefore, a question looms: why him?
Most often Khodorkovsky’s fallout with the Kremlin is attributed to a combination of business, political, and social factors. In the business category, the regime’s decision to arrest Khodorkovsky is ascribed to Yukos’ plans to build an oil pipeline to China, the tycoon’s intentions to merge Yukos and Sibneft (at the time, another large Russian oil company) and subsequent strategic partnership negotiations with American companies, Chevron/Texaco and ExxonMobil.
The oil pipeline to China advocated by Khodorkovsky, had it been built, would have “bypassed the [state-controlled] Transneft [pipeline] system and opened up world markets (above all America) to exports.”1 Yukos would have enjoyed a guaranteed outlet for a large portion of its oil and Khodorkovsky “would become an independent player in the world of geopolitics.”2 Indeed, “control over access to oil pipelines was one of the few remaining instruments of state management of the oil industry, and was not something that [the Kremlin] would casually relinquish.”3
Similarly, the impending merger of Yukos and Sibneft not only would have turned Yukos into “an independent global player in the international oil market,”4 but the attendant strategic partnership with American oil companies threatened to render Yukos and its CEO “almost untouchable.”5 Such developments were anathema to the Kremlin.
Not only did Khodorkovsky violate “the rules of the game,” but he “represented a real political challenge for the regime.”
In the political category, Yukos intensively lobbied the Duma to further its corporate interests, and supported opposition parties. Khodorkovsky’s ties to American politicians were also problematic for the Kremlin. Thus, not only did Khodorkovsky violate “the rules of the game,” but he “represented a real political challenge for the regime.”6 Moreover, Vladimir Putin resented what he perceived as Khodorkovsky’s “foreign policy entrepreneurship” on the eve of the Iraq war in early 2003, supported by the latter’s high-level American contacts.7 The Kremlin viewed “Khodorkovsky’s support for political parties [as] an attempt to buy influence in the new Duma, ensuring that legislation was passed in Yukos’ interests while blocking threats.”8 Of course, personal animosities also existed between Putin and Khodorkovsky.
However, the involvement of businessmen in politics was not unique to Khodorkovsky. For example, Roman Abramovich, owner of the investment group Millhouse Capital and the Chelsea Football Club, served as governor of Chukotka from January 2001 through July 2008. Representatives of Russian oil companies such as Lukoil, TNK, and Sibneft lobbied Duma legislators in parallel with Yukos and “no one said a word.”9 It was Khodorkovsky’s significant support of Russian civil society that distinguished him from his counterparts and decisively marked him as a target of the Kremlin’s wrath. Khodorkovsky’s failure to remain cognizant of and successfully adapt to Putin’s aversion to free agency resulted in adverse personal consequences.
Open Russia
A comparison of the missions and activities of Khodorkovsky’s Open Russia Foundation and the Voluntary Business Foundation, established by Oleg Deripaska, illustrates the crucial difference between Khodorkovsky and his colleagues. Open Russia’s support of civil society-building initiatives was perceived to most directly threaten the stability of the regime, and singled its founder out for arrest.
The Open Russia Foundation, established by Khodorkovsky in December 2001, was intended to support civil society development in Russia through a multitude of projects, including social welfare, public health, and cultural and civic education. The foundation’s programs, although long-term, also advocated for “smaller government and laissez-faire capitalism [which] were in stark contrast to Putin’s model of 'managed democracy.'”10 Some analysts have noted that the organization “usurped state functions” and “would have been able to mobilize an anti-Putin movement” stoking official concern even prior to the 2004 Orange Revolution in Ukraine.11 Thus, the Kremlin found the organization’s efforts “threatening and provocative.”12
Khodorkovsky’s allies and critics agree that a desire to develop civil society in Russia was the key factor motivating his decision to establish the Open Russia Foundation. Khodorkovsky himself “made no secret of the social engineering he was undertaking.”13 Through numerous initiatives Khodorkovsky sought to transform Russia into a “normal country.” Until his arrest in 2003, he contributed $60 million to civil society-development initiatives in Russia. This undertaking directly contradicted the development path and governance style preferred by the regime, risked undermining its legitimacy, and thus compelled the Kremlin to react in defense of its perceived interests.
Oleg Deripaska (right) has accepted the "rules of the game" laid out by Vladimir Putin.
For Khodorkovsky, turning Russia into a “normal country” meant exposing the shortcomings in the Russian government’s social, democratic, and fiscal credentials and utilizing “his money to effect social change in Russia, not just to patch up the failures of the current regime.”14 The Kremlin found these initiatives doubly irritating. Not only was Khodorkovsky enabling various forms of resistance to the regime, but in doing so he was undermining one source of its power: an apathetic citizenry. The Open Russia Foundation aimed to facilitate the transformation of Russian citizens from impassive to engaged through an array of diverse initiatives aimed largely at young adults in the midst of identity formation.
Open Russia also established an orphanage, Koralovo, for children whose parents perished while serving Russia, including young victims of the Nord-Ost theater and Beslan school sieges. The orphanage offered its residents athletic facilities, laptops with internet access, which they were encouraged to use to explore the range of opinions outside the Kremlin-approved media, and an education which allowed some to enter university. State-run orphanages paled in comparison.
Further, in order to alter the media and education landscape, Open Russia initiated a program to train journalists to question news published by the regime, purchased and reoriented the pro-government editorial board of Moskovskie novosti newspaper, endowed Hill Scholarships, “a scheme for Russian ‘Rhodes’ scholars to study at Oxford,”15 sponsored an innovative Institute for Applied International Relations intended to advance a liberal perspective on Russian foreign policy, and signed a Memorandum of Understanding with the Russian Ministry of Culture to modernize a network of village libraries in select Russian regions. Open Russia’s initiatives resulted in qualitative and quantitative changes within Russia’s then-nascent civil society. In response, the regime decided to go on the offensive against the organization and its founder.
Voluntary Business Foundation
Unlike Khodorkovsky, Oleg Deripaska, founder of the Voluntary Business Foundation and CEO of Basic Element, has safeguarded his personal freedom by adhering to the “rules of the game” set by the regime. These include an implicit (and at times, explicit) prohibitions against initiating or supporting civil society-building programs. Indeed, following Khodorkovsky’s arrest, Deripaska and other wealthy businessmen learned not to “advertise any giving to ‘civil society’ or ‘human rights’ causes.”16 Khodorkovsky’s fate “serve[d] as sufficient warning that humanitarians should keep their giving non-political.”17
A glance at the programs supported by the Voluntary Business Foundation will illustrate the “striking absence” of initiatives aiming to promote democracy or civil society.18 Founded in 1998, Voluntary Business currently oversees approximately 400 initiatives, with an annual budget of 6.2 billion rubles ($189 million), fully supported by Oleg Deripaska. The organization funds programs aimed at improving education, science, cultural and spiritual renewal, as well as health and sport. For example, Voluntary Business supported the Moscow and St. Petersburg Universities, backed the Hermitage Museum, the Bolshoi and Mariinsky Theaters, as well as the preservation of several monasteries and churches in Russia. Most recently, the foundation announced the completion of a new scientific and cultural center in Krasnodar.
Deripaska’s reportedly “good relationship” with Putin helps to address any issues that may arise as a result of the foundation’s activities. However, Deripaska has “categorically denied” that this tie exerts any influence on his choice of philanthropic initiatives, or other business practices.19 A more likely scenario is that Deripaska steers the initiatives of his foundation away from topics offensive to the Kremlin, such as civil society or democracy promotion, in order to protect his assets and to continue to reap the benefits attendant on being part of the Russian political elite. The eschewal of funding civil society-building efforts is coupled with a promise to “remain aside from politics,” refraining from “showing off his capabilities” in public, and stated “assurances that he would give up his business in favor of the state.”20
Deripaska has not only mastered the “rules of the game,” but, unlike Khodorkovsky, has chosen to adhere to them.
To date, that strategy has been successful. Oleg Deripaska has safeguarded his freedom and often can be seen accompanying President Putin on foreign trips.21 In other words, Deripaska has not only mastered the “rules of the game,” but, unlike Khodorkovsky, has chosen to adhere to them. He is the paragon of an individual who is able and willing to adapt to a regime’s aversion to free agency. Therefore, he has managed to avoid repression and to retain personal freedom. Khodorkovsky, by contrast, has spent the last ten years in jail, most recently employed “sewing curtains, uniforms, and mittens” at the rate of 600 rubles ($18) per month.22
Retaliation
In June 2003, the Kremlin-run think tank Council of National Strategy published a document entitled “The State and the Oligarchs” which warned of a “creeping oligarchical coup” in Russia, and articulated the fear that “the country’s system of governance would be changed to ensure ‘the union of super-big business and executive power.’”23 The document marked the beginning of the assault against Khodorkovsky, who was identified “as the chief ideologue of the strategy” therein.24
Khodorkovsky, for his part, remained unconvinced of the seriousness of the matter, describing the development as “the beginning of a fight for power between various branches of the sphere around [Putin].”25 Another indicator for Khodorkovsky to cease and desist funding civil society was the Kremlin’s suspension of the pre-approved Yukos-Sibneft merger. Rather than take the hint, Khodorkovsky chose to confront Putin regarding this decision. Thus, having perceived a threat from Khodorkovsky’s civil society and other initiatives, the Kremlin assessed that a draconian response was required: imprisonment without the possibility of parole.
Mikhail Khodorkovsky’s story shows that high net-worth individuals functioning in an authoritarian state must remain cognizant of and successfully adapt to an incumbent’s aversion to free agency, especially in spheres perceived as threatening to the long-term stability of the regime. Those who are able or willing to do so are likely to avoid repression at the hands of the government. Failure to do so may result in adverse personal consequences.
1 Sakwa, 134; Sixsmith, 72-73.
2 Ibid., 73.
3 Sakwa, 135.
4 Sixsmith, 74. See also Sakwa, 130. The expected merger with Yukos was not Sibneft’s first appearance on the scene. Curiously, “the only big privatization after [Putin’s election to the Russian presidency in] 2000, involved “a rigged deal.” (Aslund, Anders. Russia’s Capitalist Revolution: Why Market Reform Succeeded and Democracy Failed. Washington, D.C.:Peterson Institute for International Economics, 2007, 219.) Specifically, in December 2002, only 10 months prior to Khodorkovsky’s arrest, the Russian oil company Slavnet was auctioned off under questionable terms to TNK and Sibneft.
5 Wilson, 108.
6 Sakwa, 157. The rumor was that Khodorkovsky intended to put forth his candidacy for the Russian presidency in 2008. For the counter-argument see Sixsmith, 77. The discussion will return to the ever mutable “rules of the game.”
7 Op. Cit., 122.
8 Sakwa, 117; Sixsmith, 52-53; McFaul, Michael; Stoner-Weiss, Kathryn. “The Myth of the Authoritarian Model: How Putin's Crackdown Holds Russia Back.” Foreign Affairs, Vol. 87, No. 1 (Jan. - Feb., 2008), pp. 68-80, 82-84, 72. For evidence that Khodorkovsky was not alone in lobbying the Duma see Aslund, 206.
9 Sixsmith, 54.
10 Sixsmith, 80.
11 Sakwa, 125.
12 Op. Cit., 80.
13 Op. cit., 79.
14 Sixsmith, 78.
15 Sakwa, 124. At present, this initiative continues under the auspices of the Oxford Russia Fund which, in 2010, awarded stipends to 3236 students. Last year, the figure rose to 3560. Wiseberg, Valeriy. “Mikhail Khodorkovsky’s Charitable Foundation Lost $148 Million in the Crisis.” Marker Business Newspaper. June 7, 2011. http://marker.ru/news/491629. Accessed on November 19, 2012. In Russian.
16 Bakal, 58. Such restraint is evident not only among the wealthy elite. Bakal reports that “[a]ll donations for human rights purposes given by Russian citizens... is done under conditions of strict anonymity.” (Ibid., 59)
17 Ibid., 58; Finn, 2.
18 Ibid., 1.
19 The quotes in this and the preceding sentence are from Bentley, Ed. “Saving Oleg Deripaska.” Moscow News, No. 28, July 28, 2009. http://dlib.eastview.com/browse/doc/20422430. Accessed on November 20, 2012.
20 Unattributed. “Russian ‘economic patriot’ Oleg Deripaska profiled.” BBC Monitoring Former Soviet Union. September 2, 2007. http://search.proquest.com.ezproxy.cul.columbia.edu/printviewfile?accountid=10226. Accessed on November 20, 2012.
21 Ibid.
22 Unattributed. “A Billionaire in the Gulag.” Official Press Center for the Lawyers of Mikhail Khodorkovsky and Platon Lebedev. December 8, 2005. http://archive.khodorkovsky.ru/media/4307.html. Accessed on November 20, 2012. In Russian.
23 Ibid., 90.
24 Ibid., 91.
25 Ibid., 103.
