Open season on Russia's tycoons
As the Kremlin confronts big business, experts warn of the dangers in revisiting shady 1990s privatizations.
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Half of Russians regard the super-rich with "hatred" or "irritation," found a survey conducted last year by the independent Public Opinion Fund.Skip to next paragraph
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Khodorkovsky's Menatep Bank, for instance, bought Yukos for $168 million, a fraction of its actual worth, in a 1995 auction of state assets that most experts agree was rigged. Other Kremlin cronies similarly paid pittances for control over vast swaths of Russia's oil, minerals, industrial, and telecommunications sectors. These "oligarchs," as they were quickly dubbed, banded together in 1996 to back President Boris Yeltsin's uphill reelection bid against a strong Communist challenger, in a campaign marked by massive media abuses and funding irregularities. Following Mr. Yeltsin's victory, the oligarchs were rewarded with broad Kremlin access, and two of them - Boris Berezovsky and Vladimir Potanin - were given high government posts which experts say they used to further their business interests.
The manner of their ascent left Russia's oligarchs mired in political quicksand. "The '90s were a time of extreme legal ambiguity which left almost every Russian citizen guilty of something," says Vladimir Pribylovsky, head of the independent Panorama think tank. "The rich are the guiltiest of all. So when the prosecutors decide to go after somebody today, it's clearly a political decision and not about upholding the law."
Experts say the attack on Yukos could not occur without Putin's approval. But the president, characteristically, has offered contradictory signals. In televised remarks last Friday, Putin said he was opposed to "arm-twisting and jail cells" as a means of dealing with economic crimes. But he also warned that "economic violations must be punished" and lashed out at big business for lobbying parliament against Kremlin-sponsored bills, such as higher duties on natural resource exports.
The biggest worry, experts say, is that Putin may be listening to Kremlin factions that favor wholesale renationalization of Russia's economic base. Putin has publicly pledged to eliminate poverty, make Russia a great military power, and double its economic output within a decade. Yet investment remains stagnant, and growth rates are falling. Last week, Putin seemed to blame the selfish activities of the oligarchs: "A society split into small groups with their own narrow interests cannot concentrate on implementing major national projects," he said.
Even the liberal Yabloko party wants to smash the far-flung empires of the dozen or so super-tycoons who control 70 per cent of Russia's economy. "What we have is a system of oligarchic half-criminal capitalism, and it must be dismantled," says Sergei Ivanenko, a Yabloko Duma deputy. But, he adds that "repressive methods should not be used; they lead us into a blind alley."
Many experts believe that Putin, who has a track record of pragmatism, will slam on the brakes before the confrontation spins out of control.
But it may be harder to revive the hard-won perception that Russia has outgrown its wild and woolly '90s phase and entered an era of predictable normalcy.
"This crisis has demonstrated that Russia still lacks any institutional stability or built-in checks and balances, and is thus completely vulnerable to shifting politics," says Mark Urnov, chair of Expertiz, a private political foundation. "The resolution of any problem depends upon the will of a single man - and that's President Putin."