Mikhail Khodorkovsky used to be the richest man in Russia. Now he lives as an exile in London. He is a leading campaigner for pro-democracy in Russia. This book, the Russian conundrum, traces how things went wrong in Russia over the past three decades as Putin rose to power.
Khodorkovsky grew up in the 1960s and 70s in Moscow during the Soviet period. He studied chemistry at the Chemical Technology Institute and was deputy secretary of the Young Communist League there. He says that during these Soviet times the Russian population got little information about capitalist societies, although it was possible to catch glimpses through samizdat (pamphlets privately circulated: no internet then). The visit of Margaret Thatcher in 1987 was a revelation. Her speech, relayed through public media, told the Russian public about the capitalist alternative to state-controlled economy: an open society with democratic freedoms, and incentives for people to work hard for a better standard of living.
Glasnost and perestroika
Then the Gorbachev government in 1987 started to permit private business, just small-scale at first. Khodorkovsky with some fellow-students jumped in and started a co-operative for computer services, and then moved into importing computers. The enterprise grew quickly. They had lots of money and they needed more for ambitious projects. It was suggested they start a private bank: so Menatep was founded. As they were allowed to trade in hard foreign currency, they soon grew enormously. During the 1990s, the money in this continued to increase as, in the period when the Yeltsin government was opening Russia to more foreign trade and investment, many firms needed a trusted bank experienced with currency trades.
But this was the troubled period of the transition from Soviet economic stasis to violent change, as the large Russian industries were up for grabs. Criminal networks were out to get what they could. Khodorkovsky, as a leading banker and businessman, was appointed chairman of the Investment Promotion Fund. But he became unhappy with what the American advisers were doing to Russian industry: for instance splitting up the oil industry. He resigned from his government position and chose to concentrate on oil. He, with partners, bought Yukos at a State auction in 1996. They resolved to transform it into a model company, improving production processes with the consent of the workers. They adopted Western standards of financial reporting, and its Board contained Western representatives. It became the largest enterprise in Russia, making Khodorkovsky the richest.
Enter Vladimir Putin
But meanwhile, at the millennium, Yeltsin stepped down and handed power to Putin. At first Khodorkovsky thought this might be a good choice. In those early days, Putin used to call him for informal economic advice. In May 2000, Putin invited business leaders to a barbecue at which he made an informal pact not to interfere with the business of these companies provided they didn’t use their resources to oppose his government. By this time, Khodorkovsky was passionately promoting good corporate governance as the key to Russian economic development, but this brought him into conflict with Putin who was denouncing corrupt oligarchs, while “what he really wanted was to appropriate the resources of our private companies to serve his own interests and the interests of his friends” (who were mostly ex-KGB personnel). Some leading figures (Berezovsky and Gusinsky) were in the forefront of opposing Putin at this point, in the scenes well enacted in “The Patriots” (link to review). They were driven into exile.
When it became clear to Khodorkovsky that Putin was turning Russia back into an autocratic and corrupt society, his reaction was to found Open Russia in 2001 (somewhat on the model of George Soros’s Open Society Foundation) with the aim of getting more young Russians active in the opening up of society through use of the internet, exchanges with Western youth, a network of Citizens Advice offices, Schools of Public Policy in various regional institutes etc. Meanwhile, on the international stage, he was intent on siding with America in the Iraq war, protecting the international flows of oil to the West and getting American investment for expanding Yukos.
Putin strikes back
In February 2003, Putin summoned the leading Russian businessmen again to the Kremlin, with State TV present to record the proceedings. The agenda was “the fight against corruption.” Kodorkovsky made a speech which was a stinging rebuke of those responsible for corruption, including President Putin. The battle lines were drawn. In June, a special team of government officers stormed into the offices of Yukos and arrested Platon Lebedev, the CEO and Alexei Pichugin, head of security. Their court case was to be held behind closed doors. Khodorkovsky comments, “The Yukos case was of vital national importance for Russia. It was not just a business dispute..it was a battle between two diametrically opposed and mutually exclusive ideologies.”
The damage included a $20bn fall in the Russian stock market, and the international community losing faith in investing in Russian enterprises.
“From Yukos onwards, the country would increasingly turn its back on the Yeltsin years of liberalisation and the opening to the West; it would see the inexorable rise of nationalist, conservative forces who believe that economic freedoms and individual rights must be subservient to the interests of the state…” Soon they came for Khodorkovsky and he was arrested on tax charges. This was a legal farce for a politically motivated show trial which resulted in a nine year prison sentence in 2005.
Ten years in the gulag
Chapter 12 entitled “Gulag” is about the ten years of imprisonment. But, although he kept a prison diary, it is light on details, as clearly Khodorkovsky is more interested in political ideas and developments. He was eventually released and put on a plane to the West in 2013, when Putin wanted to look good for international media during the Sochi games.
Russia’s relationship with Europe and the West
Part 3 of this book consists of ten chapters setting out Khodorkovsky’s views on Russia and the West. Is Russia in Europe? he asks on p189. He points out that, in a population count, 120mn out of 144mn Russians live in the European area. But, from a cultural and historic perspective, the answer is not obvious. For centuries, Russia was under the autocratic rule of the Tsars, with the serfs at the bottom and no effective “civic institutions to mediate power and justice between them.” The Soviet regime was also centralising with the President as dictator. Putin has now been reigning autocratically for more than two decades. The West is seen as the ideological enemy but, at the same time, a source of envy.
The final chapters systematically cover how Putin manages a fake democracy, how corruption benefits him and his cronies, and how the Russian public is fed false information while open media have been suppressed. Putin’s view of international order is that the West is the enemy and a threat to Russia. He has projected this conflict to other countries outside Russia, such as Syria, and some African countries where Russian-paid Wagner mercenaries operate. Even when he first read Putin’s manifesto of 2000, Khodorkovsky had the first inklings that Putin’s ideology was going backwards to the tsars: “New Russia” harked back to the Slavophile, anti-Western ideas of Soloviev, that Russia had a unique mission to oppose the liberal individualistic values that were driving Western development.
Not forgetting Prigozhin and Wagner
Chapter 15 on international operations reveals more on the Wagner mercenaries, and how their leader, Prigozhin, also ran the teams of Russian “trolls” who interfered in the US elections, as exposed in the Mueller report. In the final chapters, written when the invasion of Ukraine had already begun, Kordorkovsky gives terse and realistic advice, for instance about strengthening sanctions on individuals. He is not in favour of sanctions in education, science or culture because, “once the war is over and Ukrainian sovereignty has been guaranteed it will be vital to restore cultural ties between Russia, Europe and the broader West.”
So this book is highly recommended to readers who are trying to catch up on their understanding of Russia, jolted by the war. It is not enough just to follow events as news announcements, as there is always so much more to understand, once the history and the people involved are revealed by the people who know: people like Khodorkovsky who lived through the key events and knows the protagonists.