From Oligarch to Martyr

Review

Putin's Oil: The Yukos Affair and the Struggle for Russia

by Martin Sixsmith

Continuum, 2010, 311 pp.

It plays like a scene from a Hollywood thriller–a businessman in a desperate bid to conclude a deal he thinks will ensure his safety, sees his plans fall apart as masked gunmen board his private jet and take him off into a snowy Siberian evening. Only this wasn’t a scene from a summer blockbuster, it was instead the last moments of freedom for maverick Russian billionaire Mikhail Khodorkovsky, who in the early 2000s engaged in a high-profile struggle with then-Russian President Vladimir Putin for control over the energy conglomerate Yukos – then Russia’s largest firm and the fourth-largest energy company in the world. Their fight, and Khodorkovsky’s subsequent fate, is the subject of a new book: Putin’s Oil: The Yukos Affair and the Struggle for Russia, by former BBC correspondent Martin Sixsmith.

Khodorkovsky’s arrest and trial turned him into a cause célèbrefor critics of the Kremlin; thankfully Sixsmith (largely) avoids the impulse to lionize Khodorkovsky and by doing so, manages to give the reader a more complete portrait of a very complex man. Mikhail Khodorkovsky (now 47) came of age in the dying days of the Soviet Union; even as a young man he was gripped by an entrepreneurial spirit while living in a system that emphasized the collective good over the will of the individual. Luckily for Khodorkovsky, as he reached adulthood Mikhail Gorbachev took control of the Soviet Union and a spirit of reform gripped the country. Khodorkovsky took advantage of a loosening of the rules to first create a computer consulting firm, which later transformed into a holding company called Menatep. With the demise of the Soviet Union in 1991 came a desire to rapidly transform Russia into a market-based economy by rapidly privatizing state-held assets in a policy devised by Western-based economists and euphemistically called “shock therapy.” Khodorkovsky would take advantage of his business knowledge, close ties to the government of President Boris Yeltsin, and the chaotic nature of the privatizations, to quickly amass a personal fortune that would include controlling interest in Russia’s massive oil conglomerate, Yukos, picked up by Khodorkovsky at a fraction of its alleged worth.

One man who was paying attention throughout the 1990s was Vladimir Putin, who enjoyed his own meteoric rise from little-known former intelligence officer to presidential successor to the ailing Yeltsin in 1999. Putin shared in a popular perception fostered by the economic chaos of the 1990s in Russia-that the “oligarchs” (Khodorkovsky included) in effect “stole” the riches of Russia by manipulating the poorly-run economic system. For example, in the early Nineties every Russian was given vouchers so that they could purchase a share of a state industry being privatized; in practice though, Russians with little experience in private property ownership during Soviet times, simply sold their vouchers, which were bought by the bushel by a small cadre of businessmen (who would become the mega-wealthy oligarchs). In taking office, Putin felt his mission was to right this historic wrong and bring the oligarchs to heel. By 2003, his mission was largely accomplished–the 1990s class of oligarchs had either become reliable allies of the Kremlin, or gone off to live in self-imposed exile abroad; the main holdout was Khodorkovsky. For his part, Khodorkovsky refused to back down, launching a nonprofit organization to strengthen Russia’s civil society, while musing aloud about becoming personally involved in the nation’s politics.

By 2003 it seemed that the two men were set on a collision course. The motivations for their actions are a large part of the drama that drives Putin’s Oil, but author Sixsmith has a near-impossible task: to give the reader insight into the inner thoughts and desires of two men to whom he has no direct access (Khodorkovsky languishes in a Russian prison, while Putin is ensconced within the Kremlin walls). Sixsmith relies on an expansive series of interviews with people intimately involved in the machinations of 2003, several dozen in all. Ultimately though, Sixsmith isn’t able to give a definitive answer to the motivations question. Khodorkovsky at times seems like a man done in by his own sense of hubris, betrayed by his naïve belief in the rule of law in Russia, or someone who deliberately set out to wind up in jail, thus becoming a modern-day martyr for Russia’s future. Putin’s efforts at prosecuting Khodorkovsky, meanwhile, at turns seems motivated by petty anger toward his rival, fear over the rise of a powerful political adversary, or, as Sixsmith makes a compelling case for, merely a victim himself of powerful entrenched special interests within the Kremlin that even he, the President, is powerless to stop.

Khodorkovsky’s trial and subsequent banishment to a remote, high-security prison in Siberia take up a large portion of Putin’s Oil (Sixsmith dwells a little too much on the minutiae of the legal wrangling behind the case). The proceedings  do lead the reader to ponder an important question in light of the recent bilateral summit between Russia’s current President Dmitry Medvedev and President Barack Obama–does the rule of law in fact exist in Russia? Sixsmith makes a compelling case that laws in today’s Russia can be bent (or simply ignored outright) –an interpretation that runs counter to Medvedev’s oft-stated goals of battling corruption and reforming the Russian economy by encouraging foreign investment, including his signature project of developing a Russian “Silicon Valley” to grow the nation’s high tech sector. Though as Khodorkovsky himself noted in the months leading up to his arrest, serious foreign investment–the kind that could truly establish Russia as a market economy and grow the nation’s middle class–are unlikely to occur so long as the law is viewed as malleable. Part of Khodorkovsky’s undoing seemed to have been his desire to introduce Western-style business practices into Yukos’ operations and his attempts to attract foreign investment. In that respect, Putin’s Oil could be seen as a cautionary tale for those looking to do business in the new Russia.

Finally, Khodorkovsky himself offers a provocative glimpse into the Russian psyche. Sixsmith makes it clear that Khodorkovsky views himself as a kind of martyr and, if his inner circle (the only ones with direct contact with him in jail today) are to be believed, the former billionaire has become a humble ascetic, not longing for the mind-boggling wealth he once enjoyed. In essence, he is sacrificing his own luxuries, family, and freedom, all for the greater good of the people. It’s tempting to view him as a man trying to come to terms with a harsh future in a Russian prison, but Khodorkovsky showed signs of embracing martyrdom even before his 2003 arrest. And during his trial, he repeatedly referred to himself and his wife as Decembrists, the name for a group of Russians who in 1825 refused to pledge their loyalty to a czar they felt a despot; the Decembrists were eventually exiled, along with their families, en masse to Siberia. Khodorkovsky knew his future was in peril before his 2003 arrest, yet he refused to take the path of other oligarchs into a lavish, self-imposed exile in London or Tel Aviv. Allowing what he believed was an illegitimate government to crush him, Khodorkovsky felt, would provide a cautionary tale for all Russians, and would (eventually) usher in the reforms he tried to bring about in the early 2000s. Or, as Khodorkovsky himself wrote from prison: “today it is hard for me to speak physically, but no one can say that I do not have the moral right to speak.” They are words from a fascinatingly complex man.

July 23, 2010

frontispiece and bottom photo: Mikhail Khodorkovsky over closed circuit television from prison, via BH Times.

Russia, Vladimir Putin

Ed Hancox

When not writing about international affairs, Ed Hancox works in nonprofit development. He holds a M.A. degree in International Affairs from The New School where he worked as a research associate on a project examining Russia's transition from Communism. Before earning his Masters, Ed worked as a journalist, a disc jockey, and as a technical writer with a multinational electronics firm.