Unlikely Martyr: Mikhail Khodorkovsky as Noble Dissident in Putin’s Russia
Mikhail Khodorkovsky was a brutal practitioner of Russian power politics, becoming its wealthiest oligarch. Now imprisoned by the Kremlin, the Jewish tycoon has remade himself as a noble dissident.
At the same time, Khodorkovsky decided to take full control of Yukos by declaring war on the foreign investors who had bought Yukos shares in the privatization bonanza. Khodorkovsky’s chief target became Kenneth Dart, the wily heir to an American Styrofoam cup fortune. Dart owned around 13 percent of several of the production companies that made up the Yukos empire. In the spring of 1999, Khodorkovsky began releasing tens of millions of new shares in these companies in order to dilute Dart out of his ownership. Dart protested.
In one particularly brazen—and by most measures illegal—move, Khodorkovsky managed to brilliantly outmaneuver Dart. At issue was the creation of 135 million new shares of Tomskneft, one of Yukos’ production companies. There were only 45 million shares in existence at the time, so creating 135 million new shares would dilute Dart’s ownership from 13 to 4 percent. In June 1999, when Dart’s representatives and other minority shareholders arrived at the meeting in central Moscow where they would vote on the share issue, they were greeted with a sign. The meeting, it said, had been moved to a small town south of Moscow; it would start in two hours. As Hoffman recounts in The Oligarchs, the shareholders raced to the new location, which turned out to be an old building, mid-renovation. After scouring the building, they found a small room up an improvised stairway. Inside was a table, seven chairs, and two copies of the meeting’s agenda. When the shareholders asked the construction workers if anyone had been there, they replied that some meeting had just ended about 20 minutes ago.
What was the next step for such an ambitious man? The crash provides yet another hint. The 1997 financial meltdown slashed demand for oil in East Asia, which pushed oil prices to their lowest level in years; soon a barrel of oil would cost barely more than it cost to produce it. With such thin margins, Khodorkovsky realized, the only way to make really, really big money was to sell a chunk of Yukos to a foreign oil company. Such a sale would bring him far more money than pumping more oil, especially if prices remained so low. “But you can’t sell to a Western company if you have bad accounts, you can’t do that if you’re a thief,” explains Hoffman. “He had to clean up his act in order to sell part of the company.”
Khodorkovsky’s metamorphosis into the patron god of Russian corporate governance, in other words, came first and foremost by greed rather than by some sudden fondness for principles. This kind of evolution has happened before—it was common for many Western tycoons, as well. Whatever his motives, Khodorkovsky did clean up Yukos’ operations, legitimizing it enough to pursue talks of a sale to Chevron and ExxonMobil and, later, BP. According to Hoffman, Khodorkovsky paid dividends to shareholders for the first time, published accounts meeting international standards, and reinvested profits back in the oil business and towns. Oil prices rebounded suddenly in 1999 and 2000. So did the value of Yukos. Khodorkovksy and his partners revealed that they owned 69 percent of the company. The shares soared from $.20 each to $3.60 on the Russian stock market.
And this is where Khodorkovsky went wrong: He became too big, too rich, and he didn’t share with the new people in power, Putin and his siloviki. These ex-KGB and security service officers had been left behind in the free-for-all of the ’90s; many of them were now servants of the oligarchs who had outpaced them to the gold pile. Now that they were in power, they too wanted a slice. The working theory—that Khodorkovsky ran afoul of the Kremlin by meddling in politics—only works to some extent: Putin’s chief of staff had allegedly told him exactly how much money to donate to which political parties.
In recent years, a different story has emerged. According to the updated version of The Oligarchs, published at the end of 2003, Putin convened a business roundtable in the Kremlin on February 20 of that year. Khodorkovsky, then flying high, raised the issue of a shady deal that had just gone down. A tiny company, Severnaya Neft (“North Oil”), was sold to Rosneft, then still a tiny, state-owned oil company, at a wildly inflated price—up to five times its real value. Khodorkovsky wanted to know who was behind the deal. Putin soured instantly and asked Khodorkovsky where he had gotten his oil reserves. The implication was that a new crew was on the block, and it was best not to get in their way.
This would prove a turning point. Khodorkovsky never got to sell Yukos. Instead, he was arrested and his company driven to bankruptcy by bogus government tax bills. Rendered insolvent, the company was seized and auctioned off—again at bargain prices—to Rosneft. The head of Rosneft? Putin’s old friend, rumored to have been a fellow spook.
For a while it seemed that Putin had won, and, to a large extent, he has: Unless the Kremlin experiences a cosmic change of heart, Khodorkovsky will be in prison until 2016. But prison has merely proved to be another in a series of tactical challenges for Khodorkovsky, and from his cell he has managed to parry his torturer. By coupling his political writings with a high-octane PR operation, Khodorkovsky has managed to completely obscure the life he led before 2003. He is now a prisoner of conscience, a victim of a rapacious Kremlin, a martyr. Any naysayers who bring up his past as a robber baron are shouted down as Kremlin apologists. The fact that they often are and that Khodorkovsky’s arrest and internment are clearly motivated by politics only helps Khodorkovsky’s case.
But there’s a catch: The two men have cornered each other. Putin, who has carefully crafted the image of a tough man, a master of his house, was the only president who had the gumption to stand up to the oligarchs like Khodorkovsky who threatened to bankrupt Russia. He cannot, therefore, answer any calls for justice and clemency from the West. The longer he does this, though, the more Khodorkovsky seems to be the David to his Goliath, the more appealing he becomes to the underdog-loving West, the more they call for his release. And if he were released, what would he do? The only realm left to conquer is politics, and Putin cannot risk such a showdown in flat, open terrain.
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