Would this happen in the US?
October 26, 2003 9:51 AM   Subscribe

CEO of Russia's largest oil company in jail The guy sounds like a crook to be sure; but its an interesting contrast to the US. When was the last time in this country someone with limitless financial resources was thrown in jail? Is Key Lay in jail? How about Bernie Ebbers? (Worldcom getting Iraq contracts is of course another story) Jeff Skilling? With all the talk of crony-capitalism anymore its easy to get desensitized. But to get a reality check on how to treat toplevel white-collar crime from Russia of all places is sobering.
posted by H. Roark (23 comments total)
Well, one major contrast is that in Russia, being thrown in jail often has very little to do with breaking the law.
posted by Krrrlson at 9:59 AM on October 26, 2003

Saturday's arrest comes after intensifying investigations into a growing number of companies and individuals around Mr Khodorkovsky, widely interpreted as warning shots designed to seek his submission after he had previously openly discussed his personal political ambitions and criticised aspects of President Vladimir Putin's policies.


Apperantly this guy was for modernization and against the sort of chrony-capitalism that's rampant in russia. I guess all the "transperancy" finaly caught up with him.
posted by delmoi at 10:09 AM on October 26, 2003

However, unlike other Russian tycoons who have reached compromises with the authorities over the past two years, Mr Khodorkovsky had indicated that he was operating fully within his democratic rights under Russia's constitution, and that if necessary he would go to jail to challenge methods by prosecutors that he called unlawful.
Last Thursday, the investigations took a fresh turn outside Mr Khodorkovsky's corporate activities when prosecutors raided the offices of the Agency for Strategic Communication, allegedly as part of their Yukos probe. But the agency's principal business is electoral advice to Yabloko, a liberal party which Mr Khodorkovsky has helped sponsor.

posted by delmoi at 10:15 AM on October 26, 2003

Hmm, "H. Roark" levelling charges against "capitalists". The irony.
So, Howard, just what charges do you propose levelling at those three, and what is your evidence?
posted by mischief at 10:46 AM on October 26, 2003

There is more to this story. Russia supplies most of (western and eastern) Europes oil. It also of course supplies most of Russias oil. However it charges western Europe about 5 to 10 times as much as it charges it's own people a leftover of the communist era. This presents a problem for the Government as they could be making a lot of revenue (a LOT), however they cant raise prices domestically without causing political upheaval. The prices it charges domestically are outrageously low almost to the point of subsidizing the entire countries oil energy needs. The government wants to raise prices so I believe this crackdown on the Russian oil company (largest in the world I believe) is the start of that process to demonize the oil company in the publics eye to allow the government to take more control and eventually raise prices.
posted by stbalbach at 10:47 AM on October 26, 2003

the comparison with Lay or Skilling really doesn't hold a lot of water. Khodorkovsky is so much richer (and more powerful) than these guys that the Enron/Worldcom/etc gang really looks like a bunch of smalltime crooks in comparison.

I mean, the guy's 40, for God's sake, 40 -- and he's been for years Russia's richest man, and one of the 25 world's richest. if he had any taste at all (and we're talking of a much better educated guy than the other oligarchs, by the way) he could have Santiago Calatrava redo his kitchen and Frank Gehry design his bathroom. or, if you prefer, he could have Keith Richards clean his guitar

K's arrest of course is a political act, the Kremlin is trying to rally the troops looking forward to the elections.

re delmoi's analysis -- I wouldn't really go so far as to consider him as a warrior for modernization. I mean, the oligarchs' ethics are hardly the stuff of Adam Smith's dreams
(btw Khodorkovsky used the be the director of the Soviet Youth organization when the USSR collapsed).
posted by matteo at 11:36 AM on October 26, 2003

Every one of the russian oligarchs is guilty of this kind of activity. The reason this guy was jailed was because he was openly criticizing Putin and supporting the opposition. Definitely not sobering.
posted by lazy-ville at 12:27 PM on October 26, 2003

This is not at all about crony-capitalism - this is about a CEO that supported the liberal parties and got canned.

This issue is analogous to Gates funding the Democrats and getting arrested for that.
Reality check on toplevel white-collar crime from Russia, indeed.
posted by ruelle at 12:29 PM on October 26, 2003

Please God leave Abramovich out of all this. I'm just getting used to the russian revolution up at the bridge.
posted by ciderwoman at 1:04 PM on October 26, 2003

Is Key Lay in jail? How about Bernie Ebbers?... Jeff Skilling?

Global Crossing! Is Terry McAuliffe in Jail? Nah... he is just chairman of the Democratic National Committee.

What does Terry know and when did he know it?
posted by flatlander at 1:48 PM on October 26, 2003

what we need is a presidential draft. the word 'politician' should be allowed to die out from disuse. legislators and office holders would be drafted like jurors from a pool. fair compensation paid, jobs guaranteed to be waiting when they finish their civic duty. rank amateurs who wouldn't know their way around "the system", you say? GREAT! i guess "the system" could just go fuck itself then, huh?
posted by quonsar at 2:30 PM on October 26, 2003

The guy sounds like a crook to be sure

What evidence do you have for that? I have far more information about Khodorkovsky than you do, yet I'm unable to form any firm opinion about the legality of his actions because I am aware that I'll never get relevant information that could technically incriminate him (events leading to his ascent in government energy positions prior to privatization; use of Bank MENATEP resources to secure control of companies being privatized; other actions to secure control of business structures that became YUKOS in 1992-1996 and later), and any information that I can get on his moral demeanor is likely to have been filtered through sources which are not neutral to his cause. You are far less likely to possess such information than I am.

From what I can tell, Khodorkovsky is one of the "cleaner" oligarchs in Russia's political scene of the past 5 years - struck down or not. He did not hold prominent government positions after 1993; his company, YUKOS, experienced steady growth over the past 5 years that looks far more legitimate than others' and has long been one of the blue chips of the Russian market. He is a vocal and consistent advocate of "citizens' society" (grazhdanskoe obshestvo) - "democratic" has become a very ambiguous term over the past 15 years in Russia, abused by many.

Both his biography and the scope of his philanthropic activity are reminiscent of Rockefeller's. The relative lack of "compromat" - tabloid-grade compromising evidence - on his persona contrasts with other oligarchs' profiles. Also, he is very young, as noted above, and his ascent to power did not begin until 1989. All in all, he is a remarkable figure in Russia's grotesque business landscape.

The main accusation against him is that he controlled the sale of what became YUKOS via 3 companies from his government position - a bank that was conducting the sale, a bidder, and YUKOS itself - to remove competitors from the tender and sell the assets for perhaps 1/10 the perceived value at the time. I don't know if these are the formal charges against him now. There is also a shaky murder accusation connected to YUKOS' business.

I don't believe Khodorkovsky's arrest is motivated strongly by the government's energy policy. I certainly don't believe his arrest is motivated by impartial pursuit of crime. To me, this seems directly connected to his independent political activity and a very real possibility of a runaway political career (non-existent up to now) outside Kremlin's control. Most notably, while Khodorkovsky is the richest oligarch, there are runners-up not far behind, and he is likely the most intelligent of them. Thus, the "warning shots" are directed more at the others than at him.

Khodorkovsky did not have any TV/radio/newspapers under his control, like Berezovsky and some others did. The dismantling of his corporation, if it proceeds, will consist of paralegal or illegal actions by the government seizing the majority of shares (already begun - the biggest shareholder, Platon Lebedev, is under prosecution). It goes without saying that such dismantling will sharply decrease foreign investment just when it was poised to rise sharply.

Khodorkovsky used the be the director of the Soviet Youth organization when the USSR collapsed

Not the Soviet Youth (VLKSM) - that was far, far larger than his caliber would permit him to lead at that time. He became a leader of the young entrepreneurs organization under VLKSM's auspices. Their enterprises included souvenirs for export, dyeing jeans, and so on.
posted by azazello at 3:02 PM on October 26, 2003

And yeah, Kremlin has been increasingly brutal over the past two years in its collection of support before the parliamentary/president elections (2004), and Khodorkovsky is, indirectly at least, connected to Yabloko, Russia's only decent political party (~10% of parliament).
posted by azazello at 3:08 PM on October 26, 2003

All the top shareholders of Yukon is either in jail or have fled the country - it looks like Mr. Putin has found a way of putting the thumb screws on the opposition and lay his hands on the nations greatest natural resource, all in one blow.

I would feel better if this kind of tactics weren't applied by the leader of the world's largest country and a nuclear power.

But hey, he hasn't killed anybody important yet, and all this is most likely a tactic to stop the U.S. from taking over the russian oil industry trough Exxon/Chevron.
posted by spazzm at 3:08 PM on October 26, 2003

On the subject of crooks, anyone here think that George W Bush (& maybe Jeb) will end their political careers in jail?
posted by gdav at 3:20 PM on October 26, 2003

azazello: im sure you know more about the details than I do. I guess I am quick to incriminate him by linking anyone who came out on top of USSR privitization schemes as friends and associates of Yeltsin and in general have a view that the entire privatization process was very corrupt.

posted by H. Roark at 3:34 PM on October 26, 2003

Thanks for the informed analysis, azazello. There's some interesting discussion at The Russian Dilettante as well.
posted by languagehat at 3:47 PM on October 26, 2003

Wouldn't it be simpler to ban foriegn oil ownership?
posted by delmoi at 4:00 PM on October 26, 2003

K's arrest of course is a political act, the Kremlin is trying to rally the troops looking forward to the elections.

All the top shareholders of Yukon is either in jail or have fled the country - it looks like Mr. Putin has found a way of putting the thumb screws on the opposition and lay his hands on the nations greatest natural resource, all in one blow.
posted by clavdivs at 4:09 PM on October 26, 2003

I have far more information about Khodorkovsky than you do, yet I'm unable to form any firm opinion about the legality of his actions because I am aware that I'll never get relevant information that could technically incriminate him

hmmm, smell the links above and connect the dots.
posted by clavdivs at 4:12 PM on October 26, 2003

To those who know more than I do: Is there any link between this action and the recent speculation on changing the pricing format?
posted by Dagobert at 12:51 AM on October 27, 2003

OK, nobody's reading this thread any more, but for the record, here's the best thing on the topic to date, Matt Taibbi (formerly of The Exile) in NY Press:
The key moment in this story was the winter of 1996. Polls showed that Yeltsin was certain to lose a reelection bid against the idiot communist Gennady Zyuganov. So the state, in conjunction with U.S. advisors, sold off the crown jewels of the Russian economy to these crooks for pennies on the dollar. In return, these beneficiaries massively funded Yeltsin’s reelection campaign. This is how Khodorkovsky, then the chief of a bank called Menatep, came to control the precious Yukos empire that is now under siege. It was given to him. His bank was put in charge of the auction for 78 percent of the company, and he actually excluded other bidders at will. He "paid" around $300 million (whether or not he ever paid even that money is still a matter of dispute) for his controlling 78 percent stake. The company is now valued at about $15 billion.

That doesn’t begin to tell the Khodorkovsky story. Even in the group of fantastic individuals who participated in this mass robbery, he stands out. He is the Bad Bad Leroy Brown of Russia. You know that opening scene in Goodfellas where Ray Liotta says, "All my life, I wanted to be a gangster"? Just imagine the fleshy, bespectacled Khodorkovsky slamming that trunk shut. In a nation of mobsters, he is king, a stone-cold ruthless genius. It would take a hundred thousand pages to detail all of his schemes, but they make the work of Professor Moriarty seem like a game of Chinese checkers...

This was what was described as "the encouraging emergence of market capitalism" in the new Russia, and for many years it was cool with everybody—the press, the Russian state, the American diplomatic effort. Until this year, that is, when Khodorkovsky broke the rules of the gangster-arrangement implicit in the new Russian state. He decided he no longer wanted to pay the piper—Putin. Instead of ponying up the agreed-upon tribute, he started making noise about wanting to be president himself in 2008, and then, even worse, he started to fund opposition parties.

I’ll give Putin this: He has balls. Unlike Boris Yeltsin, who dropped to his knees for every greasy hood with a dollar for eight consecutive years, Putin decided to make an example of Misha. In America, we settle these disputes by giving the F-117 contract to a different company. In Russia, the methods are a little different: an untimely car accident, an exploding briefcase, a mysterious fatal illness contracted after a routine phone conversation. Absolutely the most civilized of these options is imprisonment and seizure of assets. This is the route Putin took with Khodorkovsky. In response to the latter’s decision not to abide by the laws of gangsterdom, Putin decided, for once, to enforce the laws of the state.

How anyone can find morality in any of this is beyond me. But it is not beyond the New York Times, and it is not even beyond the Boston Globe. These papers, along with the vast majority of Western media outlets around the world, have cast this smarmy fight over assets long ago stolen from the Russian people as a battle between the evil forces of nationalization and the good, industrious representatives (Khodorkovsky) of the people-friendly market economy...

Many of us who spent the 90s in Russia became aware over time that the aim of the United States was to create a rump state that would allow economic interests to strip assets at will. The population in this scheme was to be good for consuming foreign goods produced abroad with Russia’s own cheaply sold raw materials. The aim was a castrated state, anarchy, a vast, confused territory of captive consumers, cheap labor and unguarded oil and aluminum.

Some of us who came home after seeing this began to realize that the same process is underway in the United States: the erosion of the tax base, the gradual appropriation of the tools of government by economic interests, a massive, disorganized population useless to everybody except as shoppers. That is their revolution: smashing states everywhere and creating a scattered global nation of villas and tax shelters, as inaccessible as Olympus, forbidding entry even to mighty dictators.

That’s what this Khodorkovsky business is all about—preserving that dream. Ask yourself what other reason there could be for the American press to defend a thief with eight billion dollars.
posted by languagehat at 4:51 PM on November 5, 2003

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