ANOTHER EPISODE OF "WAR AGAINST THE OLIGARCHS": RUSSIAN SOCIETY AS A "DANGEROUS SWAMPLAND"

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The week has opened on an ominous note.

The media reported that the Prosecutor General’s Office, continuing its investigation into financial abuses at the YUKOS oil company (an investigation which has truly become endless), is not restricting itself to studying tax payment irregularities at YUKOS subsidiaries. Some cases from 1998 have been pulled from the archives and reopened: the murders of Vladimir Petukhov, mayor of Nefteyugansk, Nikolai Filippov, head of the Monolit construction company, and Alexander Berliand, general director of Tomsk-Neft-Vostok. According to the Vremya Novostei newspaper, the Prosecutor General’s Office believes all these cases are “connected with YUKOS in some way.”

YUKOS has responded by describing the Prosecutor General’s Office stance as cynical, emphasizing that the attempt to link YUKOS to long-ago criminal cases is in itself the best proof of there being no evidence at all of the oil company’s involvement in financial crimes. Vremya Novostei quotes YUKOS representatives as saying: “The Prosecutor General’s Office is trying to rescue its own honor by doing as much damage as possible to the reputation of YUKOS.”

Thus, the number of cases against YUKOS has reached seven – and only two can be regarded as purly financial: those based on enquiries submitted by Duma members Mikhail Bugera and Vladimir Yudin (one of these led to the arrest of Platon Lebedev).

The Kommersant newspaper decided to assess the publicity impact of the battle between the Prosecutor General’s Office and YUKOS, asking several PR specialists for their opinions. The specialists split into two camps.

Some of them said the Prosecutor General’s Office is not pursuing any publicity goals in its actions against YUKOS. The experts in this group agreed to give “non-anonymous comments”, according to Kommersant.

For example, Andrei Shtorkh, former VP for public relations at the Slavneft oil company, says both sides in the conflict are acting quite honorably. YUKOS, according to Shtorkh, has once again demonstrated that its PR team is extremely skilled: “In this crisis situation, they are putting out plenty of press releases about oil production, thus levelling out the negative background.” And the law enforcement agencies certainly “should not engage in publicity efforts, and it’s very good that they are not doing so.”

In Shtorkh’s view, all unpleasant incidents of this kind are connected with unethical people who “seize opportunities”. This leads to “enquiries from Duma members based on newspaper articles written to order, or leaks of false negative information purporting to come from the Prosecutor General’s Office.”

However, most of the PR specialists concluded that YUKOS has been unable to offer adequate resistance to its persecutors.

For example, leading political consultant Modest Kolerov believes the response from YUKOS to these allegations indicates the YUKOS management team is at a loss: “If these are accusations of a legal nature, they should be responded to via the law; the company should not have appealed to America or cited the ‘fifth line’ the item in passports indicating a person’s ethnicity; here this is a hint at Khodorkovsky being Jewish – translator’s note.” Kolerov emphasized that YUKOS hasn’t even been able to take advantage of the fact that most media outlets have sided with it.

Those experts who had harsher comments to make preferred to remain anonymous. According to one unnamed “PR specialist from one of YUKOS’s competitors”, the reason for YUKOS’s PR passivity is “not a lack of skills in its PR team, but a lack of political will among its executives.” This specialist was not flattering: “What we are seeing now is chaotic hysteria among the liberal part of the political elite, which sees in the YUKOS situation a threat to its privileged position in contemporary Russian society.”

Another anonymous expert drew attention to the fact that although the media has essentially sided with YUKOS (and the company’s position as one of Russia’s biggest advertisers plays no small role here), there have been almost no articles written in outright defense of YUKOS: “Because editors-in-chief have obviously been directed not to criticize the Prosecutor General’s Office.”

Meanwhile, as Kommersant notes, YUKOS share prices have fallen by 25% in the two weeks since the attack began, and the company’s value has been reduced by $8 billion. Kommersant concludes: “The fall is likely to continue this week, unless YUKOS can offer the Prosecutor General’s Office an adequate response to criminal cases that are five years old.”

Actually, according to Nezavisimaya Gazeta, a presidential administration team headed by Alexander Voloshin himself is already working on a plan for getting out of this obviously dead-end situation.

The reasons for this are clear. On the one hand, according to “some opinion polls”, the public seems to approve of the crackdown on oligarchs. However, according to the Public Opinion Foundation, its poll showed that over half of respondents outside Moscow hadn’t even heard about the YUKOS events.

In any event, the presidential administration considers that “the election campaign effect of the arrests” is not as great as the damage done by this affair to Russia’s image abroad and the reputation of Russian companies. Therefore, as Nezavisimaya Gazeta says, it has been decided to “wind down the YUKOS situation gradually.”

Putin’s advisors have reportedly started working on a statement which the president could use to take the pressure off the campaign against Khodorkovsky. Presumably, the president’s statement should include criticism of both sides in the conflict: reprimanding the security and law enforcement people who have used excessively crude measures in their investigations of “complex financial matters”, as well as business leaders who “abuse their powerful economic resources in lobbying for political interests.”

Of course, it remains unknown whether Putin will want to take such advice; especially since, as Nezavisimaya Gazeta reports, his schedule over the next two weeks is so busy that he might not have time or cause for a public statement related to the YUKOS scandal.

Some other circumstances may also prevent the president from intervening in this intrigue.

Ilya Bulavinov, political editor of Kommersant-Vlast magazine, points out that Putin won the election in 2000 under the slogan of restoring order in Russia. Back then, the Kremlin decided that voters were experiencing a need for a “strong hand”. A suitable individual was found: someone capable of fitting in with these wishes, while also guaranteeing that the assets accumulated by that time would not be touched.

As everyone knows, the key issue in Putin’s election campaign was restoring constitutional order in Chechnya. The regime convincingly demonstrated its strength and harshness – in an area rather far removed from the vital interests of the elite. Of course, this was followed by the “equidistancing” of the oligarchs, and the assault on regional leaders, and increased control over the media; however, all this remained within the rules of the game. In overall terms, says Bulavinov, none of those who agreed to the new president’s terms and refrained from challenging his sole political authority have suffered any serious damage, until now.

But now, a year before the next presidential election and six months before the Duma elections (which are also very important for the Kremlin), it turns out that the situation hasn’t really changed much at all. The people still want to see order in Russia – and meeting their demands this time will be more complicated. For all the regime’s PR efforts, Chechnya still remains Russia’s major problem. What’s more, it has now become an up-close daily threat to every voter; and this, of course, does not make voters more favorably disposed towards the Putin administration.

Viewed against this backdrop, the drastic increase in activity by law enforcement agencies becomes more understandble: in Bulavinov’s view, it is an integral part of Vladimir Putin’s election campaign, which has already started. “The people aren’t happy about police abusing their power; so we get the Werewolves in Uniform operation against police corruption. The people are outraged about the wealth of the oligarchs; so attacks on YUKOS begin.”

“The oligarchs’ conspiracy is undoubtedly the hit of the new political season,” writes Pavel Voshchanov in Novaya Gazeta. “There’s no easier way of winning votes.”

It’s a very simple theme: “The public must support the current administration and the current pro-Kremlin party, if only because they have started (better late than never!) fighting against the oligarchs.” Especially since the oligarchs, not content with being powerful in the economy, are aiming to gather political power into their own hands. Therefore, people should forget any complaints they may have against the regime and vote for Putin and pro-Putin parties.

Voshchanov cites the results of certain “assessments of public opinion” – “confidential polls” the Kremlin ordered from “an influential, independent polling agency.” These reportedly showed a very different picture from the “joyful optimism demonstrated on a daily basis by politicians from the many pro-Kremlin parties.” The results may even be described as shocking: around 39% of respondents say they intend to vote for the Communists in December, while only 17% intend to vote for United Russia.

What’s more, in some Russian regions, declaring “I’m with the president!” doesn’t even guarantee a party second place, let alone a win. Hence the simple conclusion: the favorite’s victory cannot be secured through overwhelming popular support (there is no longer any talk of this); it can only be secured by the absence of worthy competition. Obviously, under the circumstances, it’s vital to clear the electoral field before the campaign begins.

Voshchanov says: “Substantial election campaign overtones can be seen in everything now taking place in relations between business and government. The crackdown on YUKOS and Mikhail Khodorkovsky has come at precisely the time when the leading pro-Kremlin party has essentially launched its campaign.” Hence the widely-publicized announcements that Boris Gryzlov is battling corruption: “Putin’s famous statement about rubbing out terrorists in the toilets now needs to be adapted for different targets. And the bigger the name, the better. That way, it will soon be forgotten that few efforts were made in this area during the last political season.”

Although the recent suicide bombings in Moscow have weakened the impact of revelations about the “oligarchs’ conspiracy”, a whole team of professionals is now working on reviving that impact. According to Voshchanov, no matter what happens from now on, that is the theory that will be presented to voters.

In Russia, any crackdown on the rich is traditionally welcomed – as restoring some kind of social justice, as the start of “the laborious task of bringing order to the nation.” Voshchanov emphasizes that this is why any doubts expressed about such issues meet with a fairly aggressive response from the public: “If you’re criticizing it, you must have your snout in the trough as well!”

The Vedomosti newspaper commissioned the Romir Monitoring agency to do a poll on attitudes to business tycoons.

The results were impressive: 74% of respondents take a negative view of the oligarchs’ role in Russia’s history over the last decade, and 77% take a negative view of the oligarchs’ role right now. Just as many (77%!) consider that the outcomes of 1990s privatization need to be revised. What’s more, a redistribution of property has support among respondents who describe themselves as “business owners or managers” (88%) or “professionals with a higher education” (87%). Young people (aged from 18 to 24) are slightly more restrained; 63% of them favor revising privatization outcomes, with 53% support among college students.

No wonder Yuri Levada, director of the National Public Opinion Research Center (VTsIOM), doesn’t consider young people a politically aware group. Levada told Vedomosti: “Young people don’t remember the Soviet past. They want to live as people live in the West, but they also want revenge on the rich.”

In the Romir poll, 57% of respondents had no objection to criminal prosecution of business tycoons by the state; and a further 31% said this would be acceptable in exceptional cases. The pollsters attribute these bloodthirsty attitudes to the prevailing view that all major fortunes have been made unlawfully: 88% of all respondents, and 72% of respondents who are business owners, agreed with this.

In short, as Gleb Pavlovsky puts it in Nezavisimaya Gazeta, it’s clear that “the basic system of property ownership in Russia is extremely unstable.” In Pavlovsky’s view, this is precisely what has been demonstrated by the YUKOS situation – in addition to the fact that the regime is having political problems.

Regardless of the outcome of the conflict, says Pavlovsky, “it is obvious that the entire societal structure of our system of governance is shaky.” Pavlovsky, head of the Effective Policy Foundation, says it’s essentially pointles to ask who is shaking the system this time, or for what purpose: “This is a lot like leaving your wallet at the train station overnight – it will undoubtedly be gone by morning, but trying to determine who took it is scarcely worth the effort.” Pavlovsky says the private property situation in Russia is similar: “There is no private property in Russia: that’s the final conclusion of the analysis in the given situation.”

It should be noted that business leaders have generally not been shocked by the results of the Romir poll. Igor Jurgens, vice-president of the Russian Union of Industrialists and Entrepreneurs, told Vedomosti: “There’s always been class hatred, and there always will be.”

Jurgens expressed the hypothesis that if a similar poll were done in the “Black districts of American cities”, the results would be very similar. Nevertheless, he described Russian society as “a dangerous swampland.”

Sergei Alexashenko, deputy general director of the Interros holding company, says the very term “oligarch” is solely applicable to the events of 1996-98, and should now be decisively discontinued.

Meanwhile, Romir Monitoring project leader Alexander Muzafarov explained to Vedomosti that Russian citizens seem to see a fundamental difference between the privatization of their own apartments and somebody’s privatization of a factory. Therefore, “their moral and ethical views in favor of confiscating that which has been ‘unlawfully acquired’ are not contradictory with an understanding at the common sense level that such actions are harmful.”

That may be why 15% of poll respondents said they were happy to hear of billionaire Platon Lebedev’s arrest. Then again, 38% didn’t care, and just as many hadn’t even heard of the “oligarch wars”. But it turns out that there are geographic aspects to this Schadenfreude: the highest proportion of respondents who said they were glad about Lebedev’s arrest was in the Russian Far East (28%), followed by Siberia (26%). Respondents in the Trans-Volga federal district were least concerned about the fate of oligarchs: 57% of them hadn’t heard about the latest events at YUKOS.

In short, the oligarchs are obviously disliked. However, says Vedomosti, this dislike is not accompanied by calls for revolution and “expropriating the expropriators” – not yet, at any rate. “Ordinary citizens think of the tycoons as a different species, and view them with contempt or indifference.”

And yet, as Vedomosti emphasizes, this doesn’t give the oligarchs even a hope of security: “Big business, infinitely remote from the people, finds itself one-on-one with the state; and the state, with the citizenry’s tacit consent, has complete freedom of action with respect to the capitalists.”

Oligarchs in Russia lack any foundation save that of money – and that, as pointed out above, has turned out to be rather shaky. If the Romir poll results are accurate, says Vedomosti, the oligarchs “can’t even try to scare their political opponents with premonitions of civil war.”

However, not all observers take this view.

Writing for Novaya Gazeta, Pavel Voshchanov says the regime “is making a serious mistake by relying on the Russian people’s distaste for the wealth of others” – especially in the context of the upcoming elections.

The consequences of such a policy, says Veshchanov, will inevitably make themselves felt at a later date: “when the regime backpedals after winning the elections, but the seeds of loathing planted in the hearts of Russian citizens (fertile soil, it must be said) have sprouted.” Veshchanov stresses that there is every reason to assume that in the near future Russia “will experience a painful period of social confrontation.”

Leonid Radzikhovsky writes in the Vremya MN newspaper: “People who live in glass houses shouldn’t throw stones: this idea never seems to sink in for the political directors of the Prosecutor General’s Office and other institutions. As soon as the oligarchs and the prosecutors start making noise in Moscow, there are joyous echoes from workers all around Russia, turning labor disputes into channels outside of the law.”

Let senior state officials, from Prime Minister Mikhail Kasianov down, insist that “there will be no redistribution of property”; let’s assume television – the “state propaganda machine” is not running a campaign against big business. “But alas,” says Radzikhovsky, “there are some ideas that have to be beaten into people’s heads for a long time, but they still don’t sink in (private property is sacred and not to be touched); and there are other ideas that are always lurking in the subconscious, and the smallest signal – even the hint of a signal – is enough for them to awaken and possess the masses. ‘Steal what has been stolen!’ is an idea from the latter category.”

In the situation as it stands, the masses have not yet taken action; according to Radzikhovsky, this is solely because Russia lacks a political party “to organize and direct the spontaneous protest of the masses.” More accurately, the place of this party is occupied by the awkward, pedantic “bureaucrats of Comrade Zyuganov.” Radzikhovsky asks: “How long can Zyuganov the giant carry the rickety structure of Russian capitalism on his shoulders alone, defending it with his heroic breast?”

After all, every time citizens get the sense that there’s some uncertainty about “big property” issues, a “wind from the left starts to blow”, in Radzikhovsky’s words. This wind seems like a weak breeze; but should it blow with its full strength, even once, then “Russian capitalism’s house of cards might collapse – both in the provinces and in Moscow.”

On the one hand, everyone understands that any kind of redistribution of property can only lead to trouble – not only for the major property-owners, but for all Russian citizens. Our country’s extremely unfortunate historical experience is evidence of that.

On the other hand, there still remains “a sense of injustice, and a sense that existing property relations are incomplete” – and if this is artificially inflamed, it could start a very big fire indeed. If those at the top are unable to act in accordance with established rules for managing property, those at the bottom are even less inclined to follow the rules.

In this situation, says Radzikhovsky, the regime can only have one objective: “to cool Russia down.” In other words, it should “explain very clearly – once, and twice, and over and over again – that property rights in our country are protected by the full power of the state; they are not open to bargaining, disputes, interpretation, or brawling.”

Officially, no one seems to be challenging this position, but with every conflict there are further attempts to rock the boat. According to Radzikhovsky, there is a simple reason for this: “Those at the top aren’t afraid of anything; all they see is each other, their own games and conflicts. They’re wrong not to fear. They’re wrong to ignore those at the bottom.”

Is the regime prepared to take decisive action to end the conflict? Commenting in Moskovskie Novosti on President Putin’s sole public statement about the YUKOS affair, Dmitrii Furman notes that Putin’s words were ambiguous: they included “some apparent approval for the Prosecutor General’s Office, and some apparent condemnation of it – to which the Prosecutor General’s Office has made no response.”

In Furman’s view, this statement from Putin doesn’t fit in at all with his image as a tough, resolute politician who personifies the “strong hand” approach. In any case, it’s a very long way from the notorious comment Putin made in 1999 about “rubbing out terrorists in the toilets”, which launched his sky-high approval rating.

This ambiguity and uncertainty, says Furman, bears no relation to any particular features of Putin’s character; it has to do with the role he’s been forced to play over the past few years.

The main point of this role has consisted in restoring order: “The kind of order that is traditional for Russia, the kind of order people miss so much.” Understandably, a “theatrical hard-line approach” and sound-bites were components of the desired image; they were important in Putin’s electoral success.

However, there is also a trap here: order in itself is meaningless. Order is usually imposed for the sake of higher strategic goals. Furman says that President Putin undoubtedly wants Russia to become a democracy with a market economy, part of the developed world. However, it’s obvious that “order in the traditional Russian sense can only be combined with free market development by great effort and for a limited time.”

After that, a choice will have to be made – either order or a free market: “The development of capitalism inevitably generates a societal layer of people who by their very activities disrupt and destroy the kind of order which the president is aiming to create.” And attempts to impose that kind of order destroy capitalism.

On the one hand, says Furman, nobody was forcing Mikhail Khodorkovsky to behave like an American billionaire rather than a Russian one: making YUKOS “transparent”, declaring publicly that he would support the Union of Right Forces and Yabloko instead of United Russia. If Khodorkovsky had been more cautious, it’s quite likely that his current problems would have passed him by.

On the other hand, Furman believes that “the ‘Fetch!’ command heard by the Prosecutor General’s Office” probably wasn’t as direct as all that. The command probably didn’t include demands for arrests and searches; at least, says Furman, it’s quite certain that nobody actually said “go ahead and do this even if it costs our economy billions of dollars.”

So the president has been set up, so to speak; or rather, he has been confronted with a choice that he cannot make and does not wish to make.

And yet the more serious problem, says Furman, is that not only the president, but Russia as a whole is facing this choice. We will have to decide what we prefer: the free market, which inevitably requires the liberty of corresponding democratic procedures – or the authoritarian order to which Russia is accustomed.

One would like to believe that we do still have this choice.

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