Earlier this year respectable western newspapers told their readers that Mikhail Khodorkovsky, then Russia’s richest man, was a close neighbour of President Vladimir Putin’s. This bit of geography was a plant from Khodorkovsky’s public relations machine, intended to convince those Americans to whom Khodorkovsky was trying to sell his Yukos shares, that Khodorkovsky and Putin were on afternoon-tea terms. Who knows if that’s why the Federal Security Service was obliged to send its agents to arrest Khodorkovsky in the central Siberian town of Novosibirsk, far away from the silverware and the petit-fours.
The editors of the Financial Times like to think they too are on afternoon-tea terms with Russia’s oligarchs. It’s one reason the FT has been unable to identify the sources of much its recent reporting. If afraction of it had been true, Khodorkovsky would be a free man today; ExxonMobil would be the new oligarch of the Russian oil sector; and President Putin’s United Russia party would have been trounced by Anatoly Chubais’s little right-wing claque at the parliamentary elections. Too much jam on English scones is known to have a sweetening effect that damages the appetite, and dulls perception.
For those who enjoy a taste for the Financial Times, here’s a cucumber sandwich from the PR men. They claim that the President has a soft spot for Roman Abramovich, the oligarch who has been calling a good many shots, since he met with Putin at the Kremlin a couple of weeks ago.
Among the shots Abramovich has been calling is the fact of the meeting itself. Although reports of the tete-a-tete have appeared in the Anglo-American press, as well as in Moscow newspapers, the position of the Kremlin spokesman, Alexei Gromov, is that nothing happened at all, Nothing official, that is. Asked to confirm the reported meeting, one of Gromov’s assistants responded: “we do not disclose that type of information. All official statements are published on the web site kremlin.ru, and you can find the answer there.” According to the website, during the period when Abramovich claims to have dropped in, the President’s schedule of meetings included one with Duma Speaker Gennady Seleznev, and another with the Patriarch Alexei II. But there is no sign that Abramovich dented a cushion on the presidential sofa. If his fingerprints were on the presidential teacup, they have been wiped clean.
Whatever the Kremlin did, Abramovich has exploited it, fostering the semblance that he has Putin’s authority to launch his attempt to unwind the merger with Yukos, or to restructure the management of the combined YukosSibneft company, or to sell an expanded Sibneft stake to a foreign oil company for much more than the $3 billion he received from the imprisoned Yukos shareholder, Mikhail Khodorkovsky. All the cards Abramovich wants his business rivals and his bank lenders to believe he is holding have been neatly laid on Putin’s desk, and made to appear there to be a royal flush, which – again according to the innuendo Abramovich has been promoting — Putin has agreed to cash for him. Abramovich has also convinced the media that his closeness to Putin places him under the president’s personal protection, and that the government’s anti-corruption investigations of Russia’s corporate malefactors shall touch neither Abramovich’s Sibneft interests, nor his personal profit-making while Governor of Chukotka.
The Kremlin’s silence has also been exploited by Yukos and its allies, not to mention the lemonade refugee Boris Berezovsky, as indicating that Putin’s election-winning campaign against the oligarchs is nothing more than that – an election stunt, aimed arbitrarily at just one oligarch and his interests. According to their claim, Putin’s only policy for the nation’s economic wealth is one of redividing the spoils, not redistributing the national welfare.
Unless the Kremlin breaks its silence, those who accuse Putin will have three months of the presidential election campaign to drum up the evidence for their charges. The protest vote against the oligarchs which Putin’s supporters handily won in the parliamentary election on December 7 is potentially unstable. The voters need to be reminded that in the etiquette classes where Putin was trained, rivals and enemies are always kept closer than friends.
If Putin cannot convince the electorate he is not a soft touch for the remaining oligarchs, the voter backlash on March 14, while unlikely to threaten the president’s reelection victory, could be embarrassing. Thus, to seal that victory, five moves should not be difficult for the President to make:
1. Appoint a new prime minister with a record for incorruptibility, and no career links to the oligarchs. No one in the current cabinet of ministers qualifies. Putin should pick an outsider.
2. Investigations by the state tax authorities and by local investment banks demonstrate that Sibneft has been paying an effective tax rate this year of 10%. That’s less than Sibneft paid last year; less than Yukos is paying; less than most other Russian oil producers will pay for 2003. Calculated as total taxes paid per barrel of production, Sibneft paid $5.41 in 2002. Yukos, which is now facing a $5 billion tax avoidance bill, paid $7.05. Putin should announce that Sibneft will have to pay up.
3. Abramovich enjoys legislative immunity for prosecution relating to actions he may have taken as the controlling Sibneft shareholder before his election on December 24, 2000. But he isn’t immune to investigation for actions he has taken as Governor of Chukotka since then. The dispatch of a federal prosecutor to Chukotka would dispel the impression that Abramovich is the beneficiary of favoritism.
4. Kremlin sources have said privately that, early in the year, Abramovich was warned that he should not attempt to sell Sibneft to foreign oil companies. That was when he and Khodorkovsky came up with their Kremlin-approved plan to merge. Putin should make a public statement confirming that if this merger is unwound, government policy will not allow a sale to foreign companies by either Khodorkovsky or Abramovich. Let’s see if Abramovich is quite so keen to pay $3 billion back to Khodorkovsky, if he can’t triple his money by selling to ChevronTexaco.
5. Anatoly Chubais should be relieved of his post as CEO of the state utility UES. In October Chubais tried to rally the oligarchs against Putin, threatening rebellion. He has used UES for his personal advancement, just as the oligarchs use their corporate treasuries. His UES reform is nothing more than another payoff to the oligarchs. Cutting Chubais from UES is the first step to cutting subsidized electricity from the balance-sheets of the oligarchs.
There is always the danger that, in a world as corrupt as the one we live in, a man who tries to be honest will look in the end to be either sentimental or stupid. But that’s not a danger the President of Russia should avoid. Boris Yeltsin convinced Russia’s voters he was sentimental, stupid, and corrupt. Those voters have just repudiated the last political relics of Yeltsin. In five handy moves, Putin can relieve himself of the danger of being honest.