The Russia Conundrum

The Yukos case was of vital national importance for Russia. It was not just a business dispute, a legal battle or a clash of personalities; it was a battle between two diametrically opposed, mutually exclusive ideologies, from which only one could emerge victorious and become the master of the nation’s future.

The schism in the Kremlin could hardly have been clearer. On the one hand, liberals like Prime Minister Mikhail Kasyanov were backing business and enterprise, a free-market economy and good relations with the West; on the other, hardline Siloviki such as Igor Sechin and Viktor Ivanov were attempting to return Russia to a centralised, statist model where strategic industries were controlled by the government and used to challenge the West rather than cooperate with it.

On 8 July, Kasyanov gave a press conference in which he denounced the trumped-up charges against Lebedev. ‘It isn’t right to arrest [him] for these alleged economic crimes,’ Kasyanov said. ‘There are enough real crimes being committed that actually threaten people’s lives … this is producing an adverse effect on the country’s image and a negative impact on the mood of investors.’ An anonymous government source, most probably the Kremlin’s chief economic adviser, Andrei Illarionov, was quoted by newspapers as saying ‘the sensible part of the presidential administration and the government believes that [this case] is inflicting damage on the Russian economy. Regardless of what happens to Lebedev, the negative consequences of what is happening now are already obvious.’

The ‘damage’ included a $20 billion fall in the Russian stock market in the space of two weeks; the ‘negative consequences’ would grow and grow until the international community would lose faith in the reliability of Russia as a place to invest. The newspaper Novaya Gazeta warned that Putin was now in thrall to the former KGB men who made up the Kremlin Siloviki. Referring to the Siloviki as ‘KGB Inc.’, the newspaper said they were exhibiting the security services’ traditional mistrust of the West and that ‘Khodorkovsky’s Western-friendly beliefs’ were perceived as particularly threatening. By crushing Yukos, they claimed to be combating Western influence. The Yukos arrests had triggered a showdown that would determine not only the fate of the country’s business model, but the future of Russian democracy.

On 3 July, I was summoned by the Russian State Prosecutor. I was told I was being questioned solely as a witness, but the threat was palpable. Afterwards, when I was asked by journalists if I was planning to leave Russia, I said I wasn’t. ‘I do not plan to leave Russia. I should have travelled to London today, but I decided to stay right here … I am not hiding and I don’t plan to become a political émigré. If it’s a choice of forcing me out of the country or putting me in jail, then they’ll have to put me in jail.’

A month later, FSB troops raided Yukos’s offices, seizing documents and computers. In September, they stormed into the boarding school for orphans that the Open Russia foundation ran outside Moscow. Armed men in masks ripped out the IT system and seized the children’s laptops. I asked for a meeting with Putin to seek an explanation, but was told this was not possible. In the past, I had been granted access to him whenever I needed it, even after our relationship had soured, so his refusal to see me now was the clearest possible signal that things were serious. I had instead a meeting with the FSB director, Nikolai Patrushev, whose offer to me of a ‘compromise’ settlement with terms he knew would be completely unacceptable confirmed that the crisis was reaching a head. I told my colleagues and fellow directors at Yukos that they should leave Russia while they still could, but that I had taken the decision to stay. At the beginning of October, I was a guest of the US–Russia Business Council in Washington, DC, and used the occasion to tell the world about the critical struggle between democracy and tyranny, between liberal reform and a return to repression and isolation, that was being played out in my homeland:

You have no doubt heard that one of the reasons for all this happening may have been my political activism … But the question before us right now is much bigger, a much more far-reaching choice: is Russia going to become a democratic country for the first time in our thousand-year history, or are we going to continue along our thousand-year path of authoritarianism? Russia has no hope of becoming a modern society in the economic sense without becoming the same in the democratic sense.

I paused, and then sought to clarify the stakes: