Tue, Nov 11, 2003 - Page 9 News List

Is Putin self-destructing?

By Anders Aslund

With the arrest of Russia's richest man, oil tycoon Mikhail Khodorkovsky, Russia has lurched into a deep political crisis. Unwittingly, President Vladimir Putin has opted for an all-or-nothing victory over the oil oligarch. At stake is nothing less than Russia's frail democracy.

The legal charges against Khodorkovsky concern old privatization and tax evasion cases. But the charges against Khodorkovsky are as flimsy as they are tendentious: the privatization case had been amicably settled previously, and Khodorkovsky has merely used tax avoidance schemes that are commonplace in Russia -- and that have been upheld in court.

Putin's real problem is that Khodorkovsky is too powerful and independent for the straitened politics he wants.

During his four years in power, Putin has advanced four major policies. The first three -- free market reform, the rule of law, and a pragmatic foreign policy -- have been widely acclaimed, while the fourth -- "managed democracy" -- has been tolerated because it has brought political stability. But "managed democracy" now threatens to unravel all three of his real achievements.

Khodorkovsky is the fourth major businessmen taken out of action by the authorities. Four independent TV channels have also been taken over by the state, and no criticism of Putin is permitted in significant media. The main polling organizations have also been brought under Kremlin control. Regional elections are regularly manipulated, often by disqualifying leading opposition candidates. The pattern is evident: a systematic authoritarian drive is underway.

Russia's oligarchs are undoubtedly unpopular, and Khodorovsky's arrest was evidently aimed at boosting Putin's prospects in the looming parliamentary and presidential elections. But although Russians dislike the powerful, and cherish underdogs and martyrs, a man in jail no longer looks strong. With Khodorkovsky's arrest, the authorities flaunted their extralegal and arbitrary powers in such a way that they have aroused widespread public worry.

Previously, Putin had enigmatically appealed to most Russians. By balancing between ex-KGB people and big businessmen, he seemed independent of both. Now he has antagonized all big businessmen; he even refuses to meet them. Suddenly, he has reduced himself to KGB president, jeopardizing the very political stability he sought to guarantee.

Putin has spoken continuously about the need for the rule of law, but in his TV statement on Oct. 27, he effectively stated his preference for law enforcers. Indeed, in the Khodorkovsky affair, all procedural requirements have been blithely neglected. For example, although prosecutors control the relevant courts, they did not bother to secure the necessary court orders for the Yukos raids and arrests.

The obvious conclusion that even ordinary Russians are drawing is that neither property rights nor people are safe. Investments are likely to be stopped or delayed. Those who can export capital will do so. An emerging panic seems certain to dampen today's strong growth.

The fallout from Khodorkovsky's arrest is felt abroad as well. The world's business press has roundly condemned the authorities' behavior, especially the impounding of Yukos shares worth many times more than possible state claims, which smacks of expropriation. Foreign governments are voicing their fears.

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