When Mikhail Khordokovsky is compared to Solzhenitsyn and Andrey Sakharov, that’s when Biznesslanch has to finally throw its hands up in frustration and pace around the kitchen until calm enough to finish reading. This is the situation I found myself in yesterday while reading Jackson Diehl’s editorial in the Nov. 8 Washington Post. Now, of course, one of Biznesslanch’s favorite activities is to read and then criticize Western mass media coverage of Russia. My favorite subject of this coverage, however, is that of the “injustice” being met out to Mikhail Borisovich Khodorkovsky.
Khodorkovsky is the former head of former oil company YUKOS and was also the richest man in Russia at one point. He has been in jail since 2003 on charges of tax evasion and fraud and is currently on trial on separate charges of money-laundering and embezzlement; prosecutors are seeking 14 years in prison in that case. In the wake of Khodorkovsky’s 2003 arrest, YUKOS was broken up and largely incorporated into state-owned oil company Rosneft and his case has become a sort of cause-celebre for Putin critics, who see his prosecution as politically motivated.
The new Russian dissidents or just two guys going back to prison? (photo courtest of ITAR-TASS)
They’re right, in a sense. Khodorkovsky was arrested in large part because he fell afoul of the Kremlin because of his support for opposition parties and because he was viewed as a potential political challenger to Putin in the medium-term. People who committed crimes similar to those Khodorkovsky is accused of still populate the list of Russia’s richest people. It is also true, however, that Khodorkovsky was almost certainly guilty of a swath of economic crimes related to YUKOS and should be in prison. His prosecution and imprisonment, as an old professor of mine eloquently put it, are 100% unfair, but 100% just. I’ll provide some of most flagrant examples of why Khodorkovsky should be in prison.
He and his bank Menatep was a participant in the mid-1990s ‘Loans for Shares’ program, which was the nadir of Russia’s privatization process. Essentially, the Russian government took out loans from banks like Menatep in order to cover a gap in tax revenue and put up shares of state-owned industries as collateral. When the government couldn’t repay the loans, the banks were able to sell the shares at auction to recoup the losses incurred by the loans. This would have been fine, except that the banks – through a variety of methods – largely restricted the auctions to bidders they controlled, allowing them to buy the companies themselves at a cut-rate price. Khodorkovsky, whose Menatep bank organized the YUKOS auction and who allegedly used close ties to the government to set the rules of the auction in his favor, bought YUKOS for $309 million – or just $9 million over the asking price – in 1995; it was worth $15 billion by 2002 (see David Hoffman The Oligarchs pp. 316-319) Continue reading
