The trial of oil tycoon Mikhail Khodorkovsky is scheduled to begin today, and the prospects for him, his associates, who also face trials, and his company, Yukos, are grim. Given the mood in the Kremlin, Khodorkovsky can expect a long prison sentence. Yukos is likely to be bankrupted.
The closer the trial has drawn, the more shameless has been the performance of the government agencies engaged in the anti-Yukos campaign. The prosecutor's office, the tax ministry, an arbitration court and the judges presiding over procedural hearings hastily cut corners to crush Yukos, which until several months ago was the biggest, best-managed and most transparent of the Russian oil companies.
To give just one example: In April the tax agency examined records from the operations of several Yukos affiliates in 2000 and announced that arrears and fines for that year amounted to about $3 billion. This was a repeat inspection -- one was done the year before and found no tax evasion. Yukos lawyers filed suit seeking to invalidate the tax ministry decision in an arbitration court. At hearings in late May it took the arbitration judge only three days to resolve the largest tax litigation in Russian history. Shortly after the arguments began between federal tax agency representatives and Yukos's lawyers, the arbitration judge abruptly closed them, and one hour later he read his ruling. It fully recognized all claims of the state.
Yukos shares have been falling steadily, and the Russian stock market has followed. Economic analysts and journalists sound alarmed. "How can one think about buying other stock if Russia's biggest company has been turned into nothing," a Russian investment banker was quoted as saying in a newspaper account.
The overall harm of the government campaign against Khodorkovsky and his company goes far beyond the stock market's performance. Since Khodorkovsky's arrest in October, Russia has become a different country. Intimidated by the move against Khodorkovsky, some Russian tycoons are cashing out and moving abroad to live. Most of the Russian business elite has opted for full obsequiousness; its members seek to prove their loyalty and eagerly sponsor institutions and efforts of the government's choice.
The illegitimacy of big business has been the dominant political theme, in particular during December's parliamentary elections. Coupled with informal restrictions on political financing, this precipitated the decline of the liberal parties sponsored by the tycoons and enabled the Kremlin to reduce to irrelevance all political opposition. The parliament was turned into a rubber stamp, and the Kremlin gained unlimited control over the political process. Today there is no political competition in Russia.
The alienation of the general public from big business was not caused by the anti-Yukos campaign. That public sentiment was unavoidable in Russia after decades of a distorted economy in which private property and the concept of profit were outlawed. But the Kremlin policy of recent months has aggravated the antagonism and brought it to the surface. Conducting big business in today's Russia is treated as a primordial sin that must be perpetually atoned for and will never be absolved. "The social responsibility of business" has become a trendy catchphrase; its meaning in today's Russia is that creating jobs and paying your taxes is not enough. Big business is seen as chronically indebted to the state and the masses; it is expected to pay back an unspecified price that only gets higher as more payments are made.
At a recent public event in Moscow, a government administrator from the northern region of Archangel gave a passionate speech that reflected her attitude toward businesses coming to her region from the "outside." Since, obviously, such companies expect to make some profit and thus gain political influence in her region, she said, it is only natural for the local administration to demand "satisfaction" from them.
The Yukos affair has become a clear instance of selective justice as well as justice bent to the will of the government. Seeing the prosecutor general bring down Russia's biggest tycoon has encouraged his local law enforcement counterparts to use their own power to intimidate local capitalists and force them to respond to the prosecutors' greed. Rumors have it that lucrative positions in the head prosecutor's office come at a price of hundreds of thousands of dollars, on which the buyer-appointee then expects a "return" from shaking down the businesses under his authority.
Khodorkovsky's path to wealth may have been murky, but in this he was not different from other Russian tycoons. The transition from a nationalized economy to market capitalism was bound to be neither fair nor pretty. What set Khodorkovsky apart was that after several years of predatory capitalist practices, he opted for business transparency and launched a large-scale philanthropy focused on development of civil society. Now Russian capitalists know better than to sponsor any organization that looks even vaguely political.
Khodorkovsky had emerged as too big, and increasingly independent, a political and economic player. The Russian state came to regard him as a strong rival who had to be dealt with. Vladimir Putin's way of dealing with him was to destroy him. Russia is paying a very high price for its president's victory.
Masha Lipman, editor of the Carnegie Moscow Center's Pro et Contra Journal, writes a monthly column for The Post.