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TRUDY RUBIN Tycoon's fate is a tale of Russia


Published: Mon, March 13, 2006 @ 12:00 a.m.


Deep in the bowels of Siberia, in a grim penal colony where the winter temperatures reach 40 degrees below zero, a man who was once one of Russia's richest tycoons and head of its largest oil company is now serving an eight-year sentence.
The fate of Mikhail Khodorkovsky symbolizes Russia's slide from semi-democracy back toward authoritarianism and the deterioration of U.S.-Russian relations. To understand what must be done to reshape those relations, it helps to look at the case of the imprisoned tycoon.
"For many of us, the Khodorkovsky trial was the first tip-off of where Russia was going," I was told by Barry Lowenkron, assistant secretary of state for human rights. Khodorkovsky's trial for tax evasion was a farce. The billionaire's real crime was not tax fraud, but his efforts to fund political opposition groups.
So President Vladimir Putin decided to make an example of Khodorkovsky. Kremlin officials knew that Russia's new class of oligarchs -- wheeler-dealers who had acquired chunks of Russia's oil and other natural resources on the cheap in the 1990s -- was deeply unpopular with ordinary Russians. Seizing Khodorkovsky's firm, Yukos, would be a political plus.
Putin had two other goals. The Kremlin aimed to put the energy sector under Kremlin control. It drove Yukos into bankruptcy via tax charges, and then state-run firms took it over. Putin also wanted to show other oligarchs who was boss and warn them to stay out of politics.
Kremlin grab
According to Putin's former economic adviser Andrei Illarionov, who quit in disgust last year, the Kremlin was also making its own grab at natural resources. "The point of the new (economic) model," Illarionov wrote, "is to redistribute resources to 'our own."' By "our own," Illarionov meant those in the Kremlin and their pals.
Illarionov further argued that this new Russian model was the same "third-world model" followed by oil states such as Libya, Venezuela, Iran and Saudi Arabia: Keep state control of oil wealth, and use it to buy off the public, while repressing political opposition.
Putin's team has muzzled the media, curbed independent political parties, muted the parliament and ended elections of governors. The Kremlin recently promulgated a law that threatens the operation of human-rights groups and other nongovernmental organizations (NGOs). These NGOs are the last bastion of Russian civil society that is free from Kremlin control.
This sad tale highlights the difficulties that now confront U.S.-Russian relations. In July, Russia will play host to the annual summit of the Group of Eight (G-8), the club of the world's richest industrial democracies. There is something bizarre about Putin's welcoming democratic leaders to St. Petersburg while Khodorkovsky languishes in the gulag.
Russia doesn't qualify for G-8 membership by virtue of economic output, but it was welcomed into the club in an effort to pull Moscow closer to Western values. Clearly, that effort is in trouble.
On the day in January that Putin took over the G-8 chair, he blocked the flow of natural gas to Ukraine as a slap at new leadership there that had defied Moscow. The blockade also cut supplies to Western Europe.
Great-power status
Putin reopened the pipeline after European governments made a ruckus. But he wants to use Russia's energy resources to restore its great-power status. He knows Europe and Asia badly need Russian oil and gas.
Is this a man the G-7 can trust?
I don't subscribe to the idea of a boycott of the summit, especially when the United States needs Russian cooperation on the Iran nuclear issue. But if it is not to embarrass itself, the G-7 has to make clear to Putin that he can't belong to the democracy club and behave like an oil autocrat.
At minimum, the G-7 should insist that Russia modify the NGO law and agree to guarantee freedom of transit through pipelines. There are some signs that Putin might listen. Russia took out a half-page ad last week in the New York Times calling on the G-8 summit to focus on "global energy security."
"The fact that the Russians thought it was necessary to take out the ad," Lowenkron says, "shows they are increasingly sensitive to the issue." And he asks: "Does Putin want to host the summit against a backdrop of stories about the decline of democracy in Russia or on the basis of issues like energy?"
X Rubin is a columnist and editorial-board member for the Philadelphia Inquirer. Distributed by Knight Ridder/Tribune.


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