The Russia Conundrum

My last face-to-face encounter with Vladimir Putin took place on 26 April 2003. I had asked for a private meeting, because the talks on our takeover of Sibneft and the negotiations with the American oil companies were at a delicate stage. Putin listened carefully and indicated that he was supportive of our plans. He did not mention the clash between us at our confrontation in the Kremlin the previous February. Only at the very end of the meeting did he raise a note of caution. There were parliamentary elections scheduled for the end of the year, Putin said, and he did not want Yukos to play any role in the campaign. He asked me to pledge that we would not support or finance the efforts of any opposition parties. I answered that Yukos was not involved in any political financing, but that individuals in a free parliamentary democracy must reserve the right to donate to any party of their choosing. I heard later that after I left, Putin flew into a rage and accused me of defying his commands.⁶ Coming after our public confrontation in February, the meeting was another blow to our relations.

In retrospect, it may seem as if I was naive to believe the reassurances I was receiving from Putin, but I also had other highly placed contacts in the Kremlin who were giving me the same encouraging signals. These were the remaining liberals in the leadership, men who had served under Yeltsin – the so-called ‘Family’ – who, I believed, still carried the torch of freedom and democracy. They included the prime minister, Mikhail Kasyanov, and the Kremlin chief of staff, Alexander Voloshin. The fact that they had stayed in high office after Putin replaced Yeltsin in 2000 indicated to me that there was still a faction in the leadership who believed in liberal values and were doing their best to resist the domination of the hardline KGB operatives of the Siloviki.

My clash with Vladimir Putin had brought to a head the battle between the liberals and the hardliners in the Kremlin and, with it, the battle for the future direction of Russia. While Kasyanov and Voloshin were defending the interests of private business and a free market, Igor Sechin and his cronies were telling the president to act against Khodorkovsky and Yukos. Putin’s decision would determine which Kremlin faction emerged victorious.

An unmistakable indication of Putin’s intentions came in June 2003, when a detachment of special forces stormed into the office of Yukos’s head of internal security, Alexei Pichugin, and ransacked his filing cabinets, impounded his safe and informed him that he was being arrested on charges of attempted murder. It was the Kremlin’s opening shot in a war that would not be long in coming, the first clear signal that the liberals had lost out to the Siloviki in the battle for the president’s ear.

Alexei Pichugin’s job was to protect Yukos’s real estate and crack down on theft within the organisation. He was a professional operator, tough but fair, and a family man with a wife and three young sons. But the Russian Prosecutor’s Office was making out that Pichugin was a ruthless killer, hiring hitmen to intimidate and eliminate business rivals. His arrest was a signal to us that Yukos was in their sights, that Putin and Sechin were intent on intimidating us into becoming another feeding trough for Putin’s cronies.

When we refused to knuckle under, the arrests continued. On 2 July 2003, the chief executive of Group Menatep, Platon Lebedev, was taken from his hospital bed, where he had been recovering from cardiovascular dystonia and chronic hepatitis, by police with guns and handcuffs and led to a waiting prison van. Lebedev was my long-time business partner and friend, involved in all our investment decisions, financial reporting and legal affairs. He was a key figure in the hierarchy of our holdings and his arrest was a dramatic escalation in the Kremlin’s assault against us. Lebedev’s arrest was a naked act of intimidation. The charge sheet that was eventually drawn up against him involved seven separate articles of the Russian penal code, ranging from ‘Grand theft of property by an organised criminal group’ to ‘Malicious non-compliance with a court ruling’ to ‘Conspiracy to evade corporate tax obligations’ and ‘Evasion of personal tax and social security obligations’. I spent the next 48 hours on the phone, trying to get an explanation of what was going on. Kasyanov told me he had spoken to Putin, who had asked him to relay the message that the arrest was ‘not political’. Voloshin rang to say he was working on Lebedev’s behalf. But the situation was serious. No one had any doubt that this was deliberate intimidation.