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Law And Property, Kremlin-Style

  • Victor Yasmann

Does Mikhail Khodorkovsky's fate await others?

Does Mikhail Khodorkovsky's fate await others?

Experts in Russia and abroad are speculating about whether the conflict around joint British-Russian oil company TNK-BP and Prime Minister Vladimir Putin's sharp public criticism of the Mechel mining and metals holding marks yet another step toward the establishment of state capitalism. And they are speculating because no one can know for sure whether the rules of the game for investors in Russia are changing and, if they are, then how?

The situation around TNK-BP is becoming relatively clear. The AAR consortium, headed by billionaire oligarchs Mikhail Fridman, Viktor Vekselberg, and Leonid Blavatnik and controlling half of TNK-BP, is trying to take control of the oil giant from its British managers, who represent the firm's foreign shareholders.

Officially, Russian government officials are not getting involved, asserting blankly that this is just a dispute between two groups of shareholders. Unofficially, TNK-BP head Robert Dudley and other British managers and specialists have left the country under strong administrative pressure from law enforcement agencies, behind which -- of course -- stand the so-called siloviki, the people in government with strong ties to the security organs.

The plight of BP in Russia seems to fit in with the overall silovik strategy of restoring state control over the energy sector that was begun in the early days of Putin's presidency. Under that strategy, Gazprom, Rosneft, and other state megacorporations are pushing Western firms out of key projects in the oil-and-gas sector.

The best that Western firms can hope for is a minority stake in strategic projects. Total, ExxonMobil, and Amoco already ran up against this practice at various times during the Putin years. Most recently, Royal Dutch Shell was forced to surrender its controlling stake in the Sakhalin-2 project under strong administrative pressure. In short, TNK-BP clearly seems to be more of the rule than the exception.

But the Mechel affair is less clear. Mechel is one of Russia's leading mining and metallurgy companies and is controlled by Igor Zyuzin. Twice in the space of a single week, Putin loudly and publicly accused the firm of using offshore schemes to avoid taxes. As a result, Mechel's market capitalization collapsed by 60 percent in the space of a few days, and Zuzin's personal net worth fell by billions. The market as a whole was also badly rocked, although it recovered quickly. The business community and foreign investors were so puzzled by Putin's unexpected choice of victims that the government issued a statement indicating that other firms in the sector were also being examined by the Federal Antimonopoly Service in order to minimize the impression that Mechel had been singled out.

But the horse was already out of the barn and many were already comparing the Mechel affair to the early days of the assault on Yukos, speculating that metals and mining would be the next sector to get the Kremlin's oil-and-gas treatment. But the Yukos comparisons don't bear close examination. Yukos was, primarily, a political affair, and former Yukos CEO Mikhail Khodorkovsky was slapped down for supporting Putin's political opponents and financing civil-society institutions that were not under the Kremlin's thumb. Of course, the siloviki and their domestic and foreign partners made out like bandits from the Yukos affair, but that was not the impulse for the attack. After all, the Kremlin did not use such measures to dispossess friendly oligarchs like Roman Abramovich and Oleg Deripaska.

So, what was Mechel and its owner, who was not involved in any political projects, guilty of? Most likely, the firm fell victim to the principle voiced by Spanish dictator Francisco Franco, who said, "For my friends, everything; for my enemies, the law." It would appear that, somehow, the head of Mechel came to be numbered among the enemies and therefore must face the law.

The Law Of The Eurasianists

And what about the law? It must be noted that, despite all the clan differences and economic conflicts of interest, all the siloviki, with their roots in the Soviet security organs, have a common and very specific attitude toward the law and property. The source of this attitude is the ideology of Eurasianism, which was quite popular at the end of the 1980s among the siloviki who now control the commanding heights of the Russian economy.

Eurasianism posits a unique civilizing role for Russia on the world stage and holds as its ideal the creation of a paternalistic, corporatist state, similar to the one Franco built in Spain. But it was the economic program of Eurasianism that attracted the most attention, as it acknowledged the market and "economic pragmatism" but clearly subordinated these concepts to political ends.

The Eurasianists do not adhere to the idea of the sanctity of private property, arguing that property cannot be "absolute or abstract, but only relative and concrete." In addition, Eurasianists hold that property owners do not enjoy absolute freedom to dispose of their property as they see fit, but are instead responsible before society. And the more "socially significant" their property is, the greater the owner's responsibility and, consequently, the less his or her freedom. In the final analysis, the owner of capital is under the control of society and the state in terms of its ultimate disposition.

Looking back at Russia's development over the last decade, including the redistribution of property and the establishment of numerous state corporations, it is amazing to see how well actual practice in the country corresponds with Eurasianist theory. One only has to recall the strange pronouncements by several oligarchs during the period of the national elections at the end of last year and the beginning of this to the effect that they are ready at any moment to surrender their fortunes if the state demands it.

The leader of the International Eurasianist Movement and the ideologue of neo-Eurasianism, Aleksandr Dugin, was an open supporter first of Vladimir Putin and later of Dmitry Medvedev. Of course, in forcing some oligarchs to emigrate, taking over the assets of Yukos, and gaining control over the huge cash flows of the oil sector, the siloviki had strong, material interests. But the way they acted and the results for Russia and the international community are surprisingly in keeping with the economic teachings of the Eurasianist movement.
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