The Russia Conundrum

In the early 2000s, Vladimir Putin and the Siloviki consolidated their power – and one method they chose was to crack down on independent critics and businesses. They wanted to seize the property of Russia’s leading industrialists because they wanted the cash, and because they wanted to show the country who was boss. Renationalising firms that had been privatised under Yeltsin would send a strong message that the era of liberal capitalism was over and the age of state power had begun. It would also allow them – and this was undoubtedly their main motivation – to take over confiscated assets and place them under their own control, just as they did in their criminal racketeering youth, with all the potential for self-enrichment that implied.

For Putin, the most important and attractive target was oil. He tasked Igor Sechin with bringing the privatised oil companies back under Kremlin control and gave him free rein to do so. Sechin had been in Putin’s service for many decades: he was Putin’s bag carrier in their home town of Leningrad, a KGB functionary who would become a leading member of the Siloviki. After Putin became president in 2000, he had made Sechin his closest adviser and now he appointed him chairman of the board of the state oil corporation, Rosneft, with the brief of taking over the companies that had been transferred to private ownership. Having gained control of Rosneft, Sechin was ruthless in pursuit of assets that would enrich himself and his Kremlin colleagues, including Vladimir Putin. The potential prize money amounted to billions of dollars and Sechin was not going to be deterred.

By now, Yukos was doing well. We had worked hard to transform the company from a polluting, loss-making dinosaur into an efficient modern business; we had battled through the perils of the 1998 crash and I was in no mood to hand over the firm we had created. Boris Berezovsky and Vladimir Gusinsky had been threatened with arrest and worse, intimidated into relinquishing their businesses and moving abroad, but I was not inclined to do so. The Kremlin’s response was to mount a series of threats against me and my colleagues.

In June 2002, I was asked by the newspaper Kommersant if I felt safe in Russia and I had no hesitation in replying, ‘Of course not. As an individual – absolutely not … The risk that I, Khodorkovsky, could be made to disappear? Yes, of course that could happen. But I don’t think they could make Yukos disappear. Society understands that the loss of such a major business would be an unacceptable loss for every single Russian person … That is why even if Putin does not like our company, he still talks to us…’ My optimism, as events would prove, was hopelessly misplaced. Within months, the talking would stop and the repression would begin.

In January 2003, we were considering making a bid to buy an oil extraction business in northern Russia called Severnaya Neft. The owners were asking for $200 million, which was well over the realistic asking price. No oil company was willing to pay it. But then we heard that Rosneft had bought the firm for a ridiculous $600 million, at least three times its real value. The deal had the hallmarks of corruption and it was likely that the excess $400 million of public funds furnished by Rosneft had simply gone into someone’s pocket. For me, it was the last straw, the final confirmation that the Siloviki were pushing Putin away from leading Russia on the path of transparency and integrity towards the old ways of cronyism and corruption. As for Putin himself, despite all his ills, I thought that maybe he was still undecided about which way to go. I would soon realise that I was mistaken.

On 19 February 2003, Putin summoned the country’s leading businessmen to another meeting in the Kremlin. It was one of a series of widely publicised forums that were designed to show the people that the president was taking seriously the problems of ordinary Russians. Recordings of the meetings were shown on national television and reported in the press. The subject of this particular meeting was ‘the fight against corruption’. The participants were expected to talk about the need to tackle corrupt practices and we thought the presence of television cameras would ensure that the president would express his determination to do something about it. We thought he would give the green light to us and our political allies in the government and the administration to take practical measures to change things for the better.