The Russia Conundrum

His anger was clear, and so was the threat. He was horrified to have the business machinations of his close entourage exposed to the Russian people. I had challenged him and he came out against me. The way Putin responded to my challenge was the clearest possible signal of where he would take the nation in the years ahead. Since then, Putin has taken Russia down a route that is a dead end; a dead end for the economy, for society, and the wellbeing of the Russian people. As part of his programme to replace liberal market democracy with centralised state autocracy, Putin would need to crush all those who had other ideas. I came away from the meeting satisfied that I had not shirked my duty of speaking out against institutionalised corruption, but I was also convinced that punishment would not be long in coming.

The months that followed my confrontation with Vladimir Putin were actually good for me and for Yukos, though my meetings with him became scarcer. In the spring of 2003, we announced that we would build a pipeline to carry oil from our Siberian fields to the fuel-thirsty industries over the border in China. We were closing in on a major takeover of the Russian oil company Sibneft and we were in negotiations with two American oil giants – ChevronTexaco and ExxonMobil – for one of them to become a partner in the new conglomerate we were about to create. The oil price, extraction rates and refining capacity were all rising and our profits rose with them. In the first nine months of the year, we netted just over $3.5 billion, compared to $2 billion for the same period in 2002, while turnover jumped from $7.95 to $12.2 billion. In April, Vladimir Putin formally congratulated Yukos on the tenth anniversary of the company’s founding, sending us a gushing message of encouragement. ‘The effective organisation of work,’ Putin wrote, ‘high professionalism and responsibility of employees allow the company not only to maintain, but to expand its position on the domestic and foreign market.’ But his praise was through gritted teeth – our workers didn’t receive any of the usual congratulatory state bonuses – and just two months later, Putin began his campaign to destroy the company.

The early months of 2003 were dominated by the build-up to the American and British invasion of Iraq, a move the Kremlin was convinced was motivated by the desire to seize Iraqi oil. The Russian ambassador to the UN opposed the planned invasion, announcing that he would veto any resolution that declared it legal. Iraq had been an ally of the Soviet Union and Putin was desperate to maintain the Kremlin’s influence there. But I looked at it in a different way. It was clear that if George Bush wanted to invade Iraq, he would do so whatever the Kremlin said. So, instead of opposing the US, I argued that Russia should take the opportunity to forge an alliance with Washington. If Russia were to support the US on Iraq – and offer to shore up America’s oil supplies with Russian oil in the event of a lengthy conflict in the Middle East – it would foster a ‘special relationship’ between the two countries, similar to the one enjoyed by the UK.

On 13 March 2003, a week before the invasion began, I gave an interview to BusinessWeek magazine, entitled ‘A Russian’s plea to back America’. In it, I said it would be foolish to let the opportunity for a long-term strategic partnership with the US slip through our fingers. ‘For economic development, Russia needs investment, Russia needs highly trained people, Russia needs markets, Russia needs technologies. When we take a look and see who would be the greatest benefit to us in all these directions, the answer is clear: America. Then there’s the matter of security, which has nothing to do with business. We’ve got a lot of regional problems and our only realistic ally is America. So if we’re going to prioritize things, then we have to say the most important relationship is with America.’ When the interviewer asked me if I had conveyed my views to President Putin, I answered, ‘He knows where I stand. It’s not a secret … I am well known in Russia for my pro-Americanism.’

I had invited world-class Western experts, including American specialists, to help improve the way Yukos was run. I had brought in US technology and know-how and had promoted the US as a vital market for Russia’s oil exports. I had founded the philanthropic foundation Open Russia, which at various times had Henry Kissinger, Jacob Rothschild, Lord David Owen and the former US ambassador, Arthur Hartman, on its board of trustees. Our negotiations with the American oil companies were a big part of our long-term business strategy to operate in the global market, as attracting American investors would be good for Yukos and for Russia. I had always kept Putin informed of our plans, with regular updates of what we were proposing. His replies were encouraging: he told us we were right to go in this direction.