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After Khordokovsky verdict, taking stock of business and corruption in Russia

Russia lashed out Tuesday at Western leaders who voiced their concern over Monday's conviction of Russian tycoon Mikhail Khodorkovsky.

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"I wouldn't mix Khodorkovsky's case with the ... investment climate," says Pavel Salin, an analyst with the independent Center of Political Assessment in Moscow. "If a businessman doesn't go into politics, he can do well here. Corruption is a kind of institution here ... if a businessman accepts the rules of the game he can succeed. All who work here in Russia take part in it. Otherwise it is impossible to go on."

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A US diplomatic cable last December and recently released by WikiLeaks, captures the difference between foreign and local views. "Despite the case's wide implications, it continues to be a cause celebre only for foreigners and a minority of Russians," the US Embassy wrote. "It is not lost on either elite or mainstream Russians that the [government] has applied a double standard to the illegal activities of 1990s oligarchs; if it were otherwise, virtually every other oligarch would be on trial alongside Khodorkovskiy and Lebedev... Most Russians believe the Khodorkovsky trial is politically motivated; they simply do not care that it is."

And while there has been much international hand-wringing about the Khodorkovsky case driving away foreign investment, analysts point out that in areas where Russia is stronger -- oil and gas in particular -- there is still much money to be made. Instead, the problem lies in how the legal and political environment stand in the way of creating a diversified economy that would create more jobs, take more of the national wealth out of the state's hands, and prepare Russia for the day when the oil runs out.

"Businesses oriented to natural resources and relying on the strong power of the authorities do not mind Khodorkovsky's case. They can get on well with an authoritative regime," says Alexey Makarkin, deputy general director of the Center for Political Technologies, a non-government think tank. "But for investors who want to invest into innovations and high technologies industries, things are different. They want transparent business and clear rules."

Mr. Makarkin says it's the corruption of petty bureaucrats and competing government power centers that are the biggest problems for investors. "For business to go on normally doesn't only mean not getting involved in politics," he says. "It is important to get on well with the authorities. The problem is that once they come to terms with one group of authorities, there is no guarantee that their competitors might not come over and make problems. The rules of the game are changing every single day."

He gives President Medvedev, who many expect Putin will seek to replace in next year's presidential election, high marks for trying to "change the system" and end "arbitrary legal proceedings" but calls the Khodorkovsky sentencing a step back. "Khodorkovsky's case reduces the effect of Medvedev's efforts to imrove the situation," he says.

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