We have repeatedly thought we had said our last about the Yukos story, and that – like with the probity of the Orange Revolution team, or the Georgian invasion of So. Ossetia – the world had begrudgingly come around to a more realistic assessment of the facts. This was, of course, to neglect the huge power of PR in our world – money can still not buy your happiness, but it can, apparently, buy truth! Khodorkovsky – a murderous thug whose comeuppance is at hand – has corrupted the Anglo-Saxon media much as he corrupted the Russian Duma in the late 90s. It shall do him just as much good… The following e-mail exchange with one of the best New York investigative journalists summarized our view.
I picked up New Yorker today and read a lead editorial by its editor David Remnick stating as a fact that the charges in the Yukos case were entirely trumped up.
It states K(hodorkovsky) did nothing but offend Putin.
Didn’t the authorities have specific charges about Yukos?
As I recall, the Yukos owners were found to have siphoned off $24 billion or so dollars through Cyprus dummy companies? Is this case better reported in Moscow?
In the US, every editorial starts with it as a frame-up and none discusses any of the actual charges.
The charges against Yukos are so obviously true that only someone who had never lived in Russia during the 1990s could harbour any doubt.
The only possible defense is that “everyone else was doing it too“… of course, they were. Yukos went down because Khodorkovsky refused to stop doing it when the umpire, Vladimir Putin, called time. The game had changed and Khodorkovsky missed his cue, believing that he still owned the Kremlin.
The problem with the “everyone else” argument is that it has no judicial validity – the fact that other folk were running pyramid schemes was not considered exculpatory for Madoff, nor before him for Boesky, Milken, Cornfield, et al. all of whom were guilty of far less criminal behavior than was the Russian Godfather.
To put it very simply, in the 1990s there was one game in town – natural resources. The privatized successors to the Soviet extraction industries all played the same game. They all “sold” their output to captive offshore entities, including both foreign-domiciled structures and the notorious “onshore-offshore” (post-box entities domiciled in the most far-flung and impoverished areas of the Russian Federation, which had been granted special tax treatment, especially if they hired the handicapped – and every one of them had an office cripple or two, who did nothing but sit drinking tea and watching the tele).
These dummy trading companies then resold the commodities onto the global markets at market prices, banking the proceeds abroad.
The Russian budget was starved for taxes as the main Russian entity officially made no profits. Substantially all of the gains accrued to the foreign bank accounts of the owners – direct or indirect. This eventuated in the financial crisis of 1998.
What is truly outrageous here is that this was such public knowledge in the 1990s. Every hack, everyinvestment banker, every investor knew the score.
No one even bothered to keep it particularly secret – since the oligarchs owned the State outright, they had little reason to fear its wrath. It is amazing how selective memories are – just do a Google search and see what was being written about Khodorkovsky at the time!
The Russian market went from a floating craps game to a real (if still very imperfect) market when the exporters – oil, fertilizers, minerals, metals – were forced to buy in their trading vehicles and repatriate their cash flows. I should know – I was involved in several such cases in the early part of the decade.
It was the high taxation of oil exports that rebalanced the Russian budget – and set Russia on the path towards fiscal stabilization. Needless to say, this massive increase in taxation was not favoured by the oligarchs.
Khodorkovsky went down for blocking the mineral extraction tax and similar legislative/fiscal changes in the Duma (Russian Parliament) where Yukos owned outright a block of voters who, in conjunction with the various “opposition parties” (from the Communists to the liberal splinter groups – most of which were funded by other oligarchs), could block any legislation he did not like… The Alfa bull took him out.
And, as old Ezra put it – “All the rest is litr’tur”.
Photograph courtesy of Nezavisimaya Gazeta