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Khodorkovsky�s arrest and the defenders of billionaires� �democracy�
By Bill Vann
4 November 2003
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On October 25, Russian billionaire oil mogul Mikhail Khodorkovsky was
arrested on charges of tax evasion and corruption dating back to the wholesale
theft of state property that constituted the privatization process of the early
1990s.
Khodorkovsky�s jailing has prompted cries of outrage from the US
corporate-controlled media.
Editorials have appeared in a number of major dailies describing the
detention of Khodorkovsky�the world�s eighth richest man, with a fortune
estimated at over $8 billion�as an act of �authoritarianism,� a threat to the
�preservation of democracy� and even a return to the police-state methods of the
Stalin-era Soviet Union.
�After laboring to project the image of a rational, law-abiding statesman,
President Vladimir Putin of Russia has reverted to the vengeful violence of his
old employer, the KGB,� the New York Times declared in an October 29
editorial. �No longer willing to pursue Russia�s most prominent tycoon through
the courts, Mr. Putin sent masked agents to seize the business magnate.� The
newspaper went on to cite international fears that �the Kremlin was showing its
true authoritarian colors.�
The Washington Post, in an October 28 editorial, charged that the
arrest demonstrated that �no one is safe from arbitrary prosecution, or from the
political whims of the Kremlin.�
�If the Russian government were to hold all wealthy businessmen to account
for the laws they broke while accumulating capital over the past decade, far
more people would be under arrest,� the Post declared.
Sounding a similar defense, an op-ed piece in the Times by Leon Aron,
director of Russian studies at the American Enterprise Institute, said of
Khodorkovsky: �...it is likely that in the 1990s he broke some laws. But in the
chaotic Russian economy of the time, when the state was privatizing its assets
on a grand scale, no large business in Russia was �clean��and the larger the
company, the greater chance it committed violations.�
A US State Department spokesman suggested that Khodorkovsky�s arrest was a
case of �selective prosecution,� adding, �We are concerned about the rule of
law, about maintaining the basic freedom of Russians.�
Expressions of concern only intensified after the Russian government froze
some 44 percent of the stock in Yukos, Khodorkovsky�s giant oil company. He
announced his resignation as the company�s chief executive Monday, in an
apparent bid to shield Yukos from government action and perhaps cut a deal for
his own release.
The outrage over the arrest of a single individual�who happens to be a
billionaire�far exceeds that exhibited by the major media and the Bush
administration over practices of the Putin regime that would appear to raise far
more troubling questions concerning freedom, democracy and authoritarianism in
Russia. There was no such storm of protest, for example, when Russian secret
police stormed a Moscow theater a year ago, killing over 100 hostages with
poison gas and carrying out the cold-blooded executions of over 50 Chechen
separatists. Nor has the media overly troubled itself over the reign of terror
in Chechnya itself and the tens of thousands who have died there under Putin�s
rule.
As for the Times� protest about the Putin regime sending �masked
agents� to arrest the oil magnate, rather than pursuing him through the courts,
the fact is that Khodorkovsky defied a court order that he appear to answer
prosecutors� questions. Such behavior results in arrest in most countries�though
rarely, if ever, the arrest of billionaires.
The argument that �they all did it,� and therefore the arrest of Khodorkovsky
is unjust, ignores precisely what it is they all did. References to committing
�violations� suggests that the billionaire failed to file an appropriate form
with the finance ministry. It hardly captures the criminal methods that resulted
in the collective wealth of one of the world�s largest countries being stolen
from its people by a handful of politically connected gangsters.
Among the charges swirling around Yukos and its chief are several murders and
attempted murders involving officials and business associates who got in the
company�s way. One of these killings was carried out on Khodorkovsky�s birthday,
allegedly as a present to the oil mogul.
Khodorkovsky got his start as a Stalinist bureaucrat in the Soviet Young
Communist League, or Komsomol. In 1987, he used his control of a Komsomol
district committee to organize a commercial entity known a Menatep, which was
supposed to promote inventions and industrial innovations. In the drive toward
capitalist restoration that accelerated under Gorbachev�s perestroika program,
the firm was transformed into a trading outfit and then a bank, which quietly
absorbed untended state funds. It then sold shares of stock, promising dividends
that never materialized.
When wholesale privatization was carried out in the 1990s, Khodorkovsky used
these funds stolen from the state and unwary investors to make deals with his
friends in the Kremlin to purchase huge blocks of formerly state-owned
industrial enterprises and petrochemical facilities at a fraction of their
value. In 1995, for example, he managed to buy Yukos�s assets from the state for
$300 million. The company�s market value is presently estimated at $30 billion�a
100-fold increase.
Khodorkovsky was the biggest winner in a process that saw the transfer of
some 70 percent of the wealth of the former Soviet Union into the hands of
barely a dozen individuals. It involved the wholesale shutdown of industries,
the wiping out of millions of jobs and the shipping out of the country of
several hundreds of billions of dollars.
For the broad masses of working people in the former Soviet Union the process
that made Khodorkovsky one of the world�s richest men was an unmitigated
catastrophe, resulting in an unprecedented destruction of jobs and incomes.
The Russian government has estimated that 31 million Russians�more than 20
percent of the population�are today subsisting on less than $50 a month. A
recent United Nations, survey, meanwhile, found that half the country�s
population is living in poverty; and the Russian State Statistics Committee last
year revealed that more than 40 million Russians suffer undernourishment on a
regular basis. Social polarization in Russia rivals that which exists in Latin
America, while the destruction of both living conditions and the health care
system sent the country�s life expectancy plummeting to 57 and resulted in a
population loss comparable only to periods of catastrophic wars, plagues and
famines.
There are no doubt powerful political motives behind the prosecution of
Khodorkovsky. First, there is the indication that he had decided to use his
immense personal fortune to bankroll opposition parties in Russia. This
apparently broke an unwritten covenant between the so-called �oligarchs� and the
Kremlin leadership committing the former to keeping out of politics in return
for the state�s keeping quite about the illicit origins of their fortunes.
Secondly, he was using his Yukos oil company to pursue what amounts to an
independent foreign policy in league with Washington and the US-based energy
conglomerates Chevron and Exxon, which were reportedly negotiating to buy as
much as a 50-percent stake in Yukos. The Russian company has unveiled plans for
breaking the state monopoly on oil pipelines, proposing to construct its own
network, and shift the flow of oil. These are issues over which wars have been
threatened and fought in the region.
It should be noted that the proposed merger deal, Khodorkovsky�s political
ties to the White House and the expressions of outrage in the US media are
tightly interwoven. Before her appointment as national security adviser,
Condoleezza Rice was a member of the Chevron board of directors, selected in
large part because of her expertise on Russia. The executive editor of the
New York Times, Bill Keller, the presumed author of the editorial
denouncing the Russian prosecutors for going after the oil mogul, is himself the
son of Chevron�s former CEO.
Finally, the state crackdown on Khodorkovsky is a politically popular
measure, likely taken by Putin with the aim of winning support in parliamentary
elections set for December. Those protesting the oil mogul�s arrest who invoke
the sanctity of democracy ignore the fact that the majority of the Russian
population would like to see all of the gangster oligarchs prosecuted and
punished for the social destruction that they have wrought.
This is certainly not Putin�s intent. He is himself a creature of the
oligarchs, committed to the formation of a strong state to defend their
interests. He has insisted that he has no intention of calling into question the
entire privatization process of the 1990s. The dispute with Khodorkovsky has the
character of a falling out among thieves.
The extreme sensitivity of the US media and the government to the
Khodorkovsky affair stems from both the considerable geopolitical interests at
stake in Russia itself, and considerations that are to be found much closer to
home.
The case against Khodorkovsky implicitly indicts the entire process that
created today�s 17 Russian billionaires�the destruction of the Soviet Union and
the restoration of capitalism�as essentially a criminal enterprise. These crimes
were not just the work of the relative handful of individuals who became Russian
�oligarchs.� The Stalinist bureaucracy and world capitalism united to carry out
this brutal and rapacious operation.
To call into question the legitimacy of the restoration of capitalism in what
was once the USSR puts a question mark over not only the fortunes amassed by
Khodorkovsky and similar figures in Russia, but also the far greater profits
reaped by banks and financiers in the US and Europe, who were the principal
beneficiaries of the massive capital flight that began in the 1990s and
continues to this day. These hundreds of billions of dollars were stolen from
the people of the former Soviet Union.
Moreover, the criminal methods employed to restore capitalism in the USSR are
not entirely unique. Rather, they constitute a particularly concentrated
_expression_ of tendencies that have operated on a world scale. Over the past two
decades, vast transfers of wealth from the working population into the
portfolios of a relative handful of multi-millionaires and billionaires have
characterized �free market� economic development all over the world, and
especially in the US.
The consequences�falling living standards; the destruction of jobs, health
care and social services; deepening poverty and inequality�are likewise common
features of social life in America, Russia and, to one degree or another, the
entire world.
Nor is the criminality of Russia�s oligarchs an aberration. In the US,
corporate CEOs and Wall Street financiers have amassed obscene fortunes,
collecting annual compensation in the hundreds of millions of dollars by looting
the assets of companies and funds for which they are responsible.
As the revelations at Enron, WorldCom, Global Crossing, Tyco and a number of
other firms have made clear, wealth has been created for a tiny layer at the top
by defrauding investors while wiping out the jobs, pension funds and life
savings of millions of people. The criminal methods at home find their corollary
abroad in the illegal war to seize Iraq�s oil wealth. Both are driven by a
deep-seated crisis within the profit system and the attempts by the ruling elite
to offset that crisis.
�Behind every great fortune is a crime,� Balzac said in the 19th century.
Never has this aphorism been so verifiably accurate as today, both in Russia and
in the US. The exaggerated concern for the fate of Khodorkovsky is rooted in a
sense of �there but for the grace of God go I,� among the ruling elite in the US
and elsewhere.
Behind the bleating about democracy and freedom in relation to the
Khodorkovsky case is a palpable fear among this layer that calling into question
the legitimacy of ill-gotten wealth in Russia or anywhere could have unforeseen
and far-reaching consequences.
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