Thursday, October 02, 2014

The Power Vertical

The Khodorkovsky Endgame

Mikhail Khodorkovsky speaks to a lawyer as he stands in the defendants' box during a court session in Moscow on May 24, 2011.
Mikhail Khodorkovsky speaks to a lawyer as he stands in the defendants' box during a court session in Moscow on May 24, 2011.
Are the Russian authorities really considering a pardon for Mikhail Khodorkovsky? The markets sure seem to think so.
Deutsche Bank AG and Troika Dialog both said this week that the former Yukos CEO, who has been incarcerated since October 2003, has a 50-50 chance of being granted early release.
In a note to clients on March 26, Yaroslav Lissovolik, Deutsche Bank’s head of research and strategy for Russia, said Khodorkovsky's chances of being freed were “significantly higher than anytime in the past."

The Khodorkovsky case is widely seen by investors as a metaphor for the absence of the rule of law in Russia. 
Khodorkovsky, once Russia's richest man, is serving a 13-year sentence for two separate convictions for tax-evasion, fraud, and oil embezzlement that critics say are punishment for opposing Vladimir Putin's authority.
Releasing him, analysts say, would have a bullish effect on the Russian stock market. 
Both Lissovolik and  Roland Nash, chief investment strategist at Verno Capital in Moscow, told Bloomberg News that this could add as much as 10 percent to the value of Russian shares.
What exactly is driving these market expectations? In large part, they are a reaction to signals being sent by the Russian authorities.
On March 5, President Dmitry Medvedev ordered Prosecutor-General Yury Chaika to review Khodorkovsky's case, as well as others raised as politically motivated prosecutions by opposition activists in a February 20 meeting with the outgoing Kremlin leader. Chaika has until April 1 to complete the review.
Moreover, earlier this month, the Kremlin’s human rights council urged Medvedev to pardon Khodorkovsky before Putin's May 7 inauguration. The council, which is strictly advisory, called Khodorkovsky's conviction “a fiction,” adding that there was “no evidence” to support the charges against the former oil executive.
And as "Nezavisimaya gazeta" reports, two key members of the council,  Chairman Mikhail Fedotov and former Constitutional Court Justice Tamara Morschakova, said that there was no legal requirement that Khodorkovsky admit his guilt as a precondition for receiving a presidential pardon. Khodorkovsky has repeatedly said he would never admit his guilt.
Russia's human rights ombudsman, Vladimir Lukin, also suggested last week that a Khodorkovsky pardon might be on the table.
"I think there is an increasing number of indications that the authorities are considering this issue, although I personally am not aware of it," Lukin told Interfax on March 23. 
"I have discussed it with the president; he knows that he has this legal power. However, I don't know how events will unfold.... I believe that the sooner humanity is shown toward Khodorkovsky, in one form or another, the better it is for everybody, including the authorities, civil society, and him too."
It seems clear that Medvedev, who has said in the past that releasing Khodorkovsky would not be dangerous, favors a pardon. But if this long saga is really moving toward an endgame, it would require the blessing of Putin, who in reference to the case has said that "a thief must sit in prison."
Moreover, as Igor Yurgens, an adviser to Medvedev who heads the Institute for Contemporary Development, told "Nezavisimaya gazeta," there are also powerful forces in the ruling elite opposed to releasing Khodorkovsky. These include the law enforcement hierarchy and those connected to the oil industry who benefitted from the break-up and redistribution of Yukos's assets (see Rosneft and Sechin, Igor). 
"There is the whole vertical of law enforcement agencies objecting to Khodorkovsky's release. They will see this as a slap in the face," Yurgens said. "Even should Khodorkovsky himself decide to keep a low profile afterward, Yukos's foreign shareholders might demand compensation from Russia." 
But that said, those familiar with the case say there has been a noticeable shift in favor of a pardon as more of the ruling elite come to the conclusion that keeping Khodorkovsky in prison has become a liability for the Kremlin, while the benefits of his continued incarceration diminish.
-- Brian Whitmore

Tags: Mikhail Khodorkovsky

This forum has been closed.
Comment Sorting
by: Bruce W. Bean from: Michigan State University
March 29, 2012 01:34
Yes, the chances for pardon of Khodorkovsky and Lebedev are much improved. The odds may have moved 1 chance in 1000 to 1 chance in 300.
But, regrettably, the anti-Khodorkovsky bias within the government will prevail.


by: Ray F. from: Lawrence, KS
March 30, 2012 13:25
I’m not a market expert, but not sure they should be used as an accurate gauge for political decisions. Did the Russian markets foretell MK’s arrest in 2003? I can’t help but think that this is more wishful thinking on the author’s part. With the recent rash of embarrassing revelations over police torture in Russian jails, releasing MK would send the absolute wrong message to the country (i.e. we are weak and unable to control the situation). Hope I’m wrong, but must agree Bruce above. MK will likely still be behind bars in 2018.

by: Marko from: USA
March 30, 2012 17:23
I doubt he gets out, wharever Dima may want.. While Khodorkovsky's second conviction was legally dubious, and he has been subsequently reinvented as a some sort of saint by Moscow liberals and the West, he was always actually a greedy, ruthless (quite possiblly murderous) oligarch. He is not and has never been generally popular in Russia. Ironically, he was portrayed in the Western media in a very negative light before he began "playing ball" with Western energy multinationals such as Exxon and trying to destabilize the Russian government by funding, of all things, the Communist Party. The attempted sellout of Russia's energy assets to the West and the cynical assistance to the Communists are what triggered Putin's anmosity ... A saint, not so much.

by: vyto2ba from: vilnius
April 04, 2012 06:14
One of the tests for the success of the "reset" policy is the resolution of the Khordokovsky case. If he is released and not kept down and out afterwards those who criticise the "reset" will have one less argument in their favor. Would be the first evidence of a positive move away from the track Russia has taken since 2000.

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LIVE In this space, I will regularly comment on events in Russia, repost content and tweets I find interesting and informative, and shamelessly promote myself (and others, whose work I like). The traditional Power Vertical Blog remains for larger and more developed items. The Podcast, of course, will continue to appear every Friday. I hope you find the new Power Vertical Feed to be a useful resource and welcome your feedback. More

Semyon Guzman, a prominent Ukrainian psychiatrist, says Vladimir Putin hasn't gone crazy -- he's just evil.

"Many really consider that he suffers from definite psychological illnesses,” Guzman wrote in a September 30 article (a big h/t to thei ndispensable Paul Goble for flagging this).  

"This is only a convenient explanation in the existing situation. Unfortunately, it is not correct.”

Putin's character traits, "ike those of a murderer, thief or other good for nothing, are not psychiatric phenomena but rather objects of the subjects of moral philosophy.” Guzman wrote. He added that Putin was "absolutely responsible" for his actions.

Karen Dawisha, who appeared on the Power Vertical Podcast back in April, dscusses her new book "Putin's Kleptocracy: Who Owns Russia"

From RFE/RL's News Desk:


The head of the European Commission says an EU-Ukraine trade deal can only be changed by Brussels and Kyiv – not Moscow.

Jose Manuel Barroso made the remarks in a letter to Russian President Vladimir Putin released on October 1.

Ukraine's parliament ratified its agreement with the EU last month. 

However, the implementation of the trade part of the deal has been delayed until January 2016 to appease Russia, which says the pact will hurt its markets.

Moscow has called for more three-way negotiations to amend the deal and threatened to curtail Ukraine's access to Russian markets if Kyiv implements it.

In his letter, Barroso warned Putin not to impose new trade measures, saying it would threaten the agreement with Russia to delay the EU-Ukraine pact.

(With reporting by Reuters)

And for anybody interested, here's the full text of Barroso's letter:

"Mr. President,

Following your letter of 17 September, I would like to welcome the constructive engagement from all sides in the trilateral ministerial meeting on the implementation of the EU-Ukraine Association Agreement, including a Deep and Comprehensive Free Trade Area on 12 September.

The conclusions reached at that meeting were endorsed by all participants and set out in a joint ministerial statement.

On the EU side, we have informed our Member States of the outcome of the trilateral process, and we have now obtained their approval for the necessary legislative steps.

I should emphasize that the proposal to delay the provisional application of the DCFTA is linked to continuation of the CIS-FTA preferential regime, as agreed in the joint ministerial statement. In this context, we have strong concerns about the recent adoption of a decree by the Russian government proposing new trade barriers between Russia and Ukraine. We consider that the application of this decree would contravene the agreed joint conclusions and the decision to delay the provisional application of the trade related part of the Association Agreement.

The joint ministerial statement also foresees further consultations on how to address concerns raised by Russia. We are ready to continue engaging on how to tackle the perceived negative impacts to the Russian economy resulting from the implementation of the Deep and Comprehensive Free Trade Area.

I take however this opportunity to underline that the Association Agreement remains a bilateral agreement and that, in line with international law, any adaptations to it can only be made at the request of one of the parties and with the agreement of the other, according to the mechanisms foreseen in the text and the respective internal procedures of the parties.

I wish to recall that the joint conclusions reached at the Ministerial meeting state clearly that all these steps are part and parcel of a comprehensive peace process in Ukraine, respecting the territorial integrity of Ukraine as well as its right to decide on its destiny.

Consequently, while all parties should implement the conclusions as laid down in the joint ministerial statement in good faith, the statement does not and cannot limit in any way the sovereign prerogatives of Ukraine.

The European Commission remains fully committed to contribute to a peaceful solution. In this respect we hope that the recent positive steps embodied in the Minsk Protocol of 5 September and the ensuing memorandum from 19 September will be fully implemented, including the monitoring of the Ukrainian-Russian state border and its verification by the OSCE, and the withdrawal of all foreign armed formations and military equipment from the Ukrainian territory.

We also expect that rapid and decisive progress can be achieved in the trilateral gas talks towards a mutually acceptable interim solution for the upcoming winter period, on the basis of the compromise elements set out by the European Commission. It is key that the resumption of energy deliveries to the citizens of Ukraine is ensured and that the fulfilment of all contractual obligations with customers in the EU is secured.

Yours faithfully,

José Manuel BARROSO"


And just when you though it couldn't get any weirder, Valery Zorkin destroys your illusions.

That's Valery Zorkin, the chairman of Russia's Constitutional Court. Zorkin penned an article last week in "Rossiiskaya gazeta" (that's the official Russian government newspaper, by the way), calling for -- wait for it -- a return to serfdom. A big h/t to Elena Holodny at Business Insider for flagging this.

Here's the money quote:

"Even with all of its shortcomings, serfdom was exactly the main staple holding the inner unity of the nation. It was no accident that the peasants, according to historians, told their former masters after the reforms: 'We were yours, and you — ours.'"

Zorkin also took a shot at Pyotr Stolypin, the 19th century reformist prime minister (and a hero of Vladimir Putin's), and his judicial reforms.

"Stolypin's reform took away communal justice from the peasants in exchange for individual freedom, which almost none of them knew how to live and which was depriving their community guarantees of survival."

I wonder what that portends. Zorking also compared the abolotion of serfdom to the post-Soviet reforms of the 1990s.


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The Power Vertical is a blog written especially for Russia wonks and obsessive Kremlin watchers by Brian Whitmore. It covers emerging and developing trends in Russian politics, shining a spotlight on the high-stakes power struggles, machinations, and clashing interests that shape Kremlin policy today. Check out The Power Vertical Facebook page or