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Russia Report: November 12, 2003

12 November 2003, Volume 3, Number 45
By Floriana Fossato

Print media coverage in the week following the 25 October arrest of former Yukos CEO Mikhail Khodorkovskii and events culminating in the 30 October resignation of presidential chief of staff Aleksandr Voloshin was intense and varied.

Newspapers, both state-controlled and private, and Internet sites scrambled to assess the significance, dimension, and consequences of a crisis that has been widely viewed as the most serious in Russia since the August 1998 financial collapse. Experts analyzed its impact on the economy from every conceivable point of view, while political analysts probed the connection between Khodorkovskii's arrest and Voloshin's resignation and the impact of these events on the looming parliamentary and presidential elections.

By contrast, national television seemed pale and one-dimensional. "The Khodorkovskii-Voloshin affair is showing the full extent of state control over [national] television for the first time since the liquidation of TVS [Russia's last nonstate central television channel]," said Moscow-based web designer Yekaterina Pakhomova. "During the whole week after Khodorkovskii's arrest, you could turn on the television after reading about something in a newspaper or on the Internet, and there would be almost nothing. As if the affair were taking place in a distant country."

The national networks -- now all safely under state control following the takeover of NTV and the closures of TV-6 and TVS over the last couple of years -- seemed to take their coverage cues from President Vladimir Putin. At a cabinet meeting on 27 October, two days after Khodorkovskii's arrest and at a time when the papers and the Internet were full of rumors of Voloshin's impending resignation, an angry Putin was shown on television endorsing the prosecutors' actions and calling for "an end to all the speculation and hysteria."

As if on command, RTR, ORT, and NTV have by and large followed this dictum in their evening newscasts and their weekend analytical programs. NTV -- which is now owned by the state-controlled natural-gas monopoly after being forcibly wrested from the Media-MOST empire of former oligarch Vladimir Gusinskii -- gave the Yukos affair the most coverage, but it has often packaged it coverage in the form of infotainment, featuring information, for example, on what Khodorkovskii is eating in prison and what his cell is like.

ORT, the main state channel that covers 98 percent of the Russian population, has had the most severely restricted coverage of Yukos and the Kremlin reshuffle following Voloshin's departure. The main state news agencies demonstrated a similar pattern. Andrei Zolotov, a management adviser at state-owned RIA-Novosti, told RFE/RL's Russian Service that his agency "did not carry any commentaries" in the week following Khodorkovskii's arrest "because commentaries were seen as creating confusion." Nonetheless, he maintained, the quality of RIA-Novosti's news reports "was very high."

The international journalism advocacy organization Reporters Without Borders (RSF) in October released a global press-freedom index that ranked Russia 148th out of the 166 countries examined. Russia's negative rating ranked it just ahead of Belarus and Libya, and lower than Afghanistan, Somalia, and Colombia. The Kremlin, however, took little notice of the assessment, although its findings were widely reported by Russian newspapers and websites.

Concerns about creeping totalitarianism have so far not trickled down to the Russian public at large. A survey published before the Yukos events by VTsIOM-A -- a research agency that was formed by employees who fled the respected VTsIOM polling agency in the wake of a government effort to install new management there in the run-up to the elections -- found that 56 percent of respondents are most worried about poverty, while 48 percent worry about inflation, 44 percent about unemployment, and just 1 percent worry most about the increasing assaults on civil liberties under the Putin administration.

State control of the national media does much to foster these attitudes. Regional television -- which is usually controlled by local authorities, most of whom have thrown in their lot with Putin over the last three years following the defeat of the Fatherland-All Russia bloc in the 1999 Duma elections -- focuses primarily on local issues, and central newspapers have limited circulations outside the major cities. This means that citizens in the regions must rely on ORT, RTR, and NTV to get "the big picture" of national and international events.

The low-key coverage of the national networks was best exemplified on 30 October, when a relaxed Putin was shown meeting with representatives of leading international and Russian financial groups, assuring them that there is nothing untoward in the Yukos affair just hours after the Prosecutor-General's Office ordered a 44 percent block of the company's shares frozen.

Public confidence in the media has never recovered since the disastrous "information wars" of the mid-1990s. Moreover, confidence in other civil-society institutions such as parliament, the prosecutors, and the police has declined precipitously in recent years.

Russian television journalists often repeat the mantra that viewers are not interest in freedom of expression. All they want, the journalists say, is Putin, Putin, Putin, and sports. Analysts, however, question whether this self-defeating attitude is not a mask for journalists' complaisance and acceptance of censorship and self-censorship.

Despite the overall bad and worsening media situation in Russia, there have been efforts -- some apparently successful -- to reverse the trend. On 30 October, the Constitutional Court defied the Duma and the Putin administration by striking down provisions of the law on guaranteeing the rights of voters that strictly restricted media coverage of election campaigns.

The ruling came in response to appeals from journalists and more than 100 Duma deputies, who claimed the law -- which Putin signed into law in June -- essentially meant that journalists could not write anything about the campaigns or the candidates without fear of administrative reprisals. Even Media Minister Mikhail Lesin and Federation Council Sergei Mironov, both of whom have advocated stricter control over the media in the past, criticized the law for creating an information vacuum around the campaign.

In reading the court's ruling, Constitutional Court Chairman Valerii Zorkin said the law included sweeping language that was "incompatible with the principal of equality before the law," and that it seriously infringed upon citizens' constitutionally guaranteed right to receive information.

The ruling could encourage journalists to cover the elections thoroughly, informing voters in depth about the candidates without excessive fear of lawsuits being filed by public officials -- as they are supposed to.

Floriana Fossato is an independent Russian media and political analyst, currently based in Moscow.

Members of the Central Election Commission (TsIK) on 4 November reviewed complaints filed by Communist Party (KPRF) leader Gennadii Zyuganov and several citizens about central television coverage, and TsIK Chairman Aleksandr Veshnyakov acknowledged that those complaints have some merit, "Kommersant-Daily" reported on 5 November. Veshnyakov called on all federal television stations to observe the law, and to adhere to the basic principles of "objectivity and accuracy, and not to allow violations of the principle that all candidates are equal."

According to the pro-Communist paper "Sovetskaya Rossiya" on 6 November, the commission's legal department found that the Channel One (ORT) open joint stock company and VGTRK (All-State Television and Radio Company) have violated elections legislation. The lawyers concluded that on Channel One and Rossiya (RTR), "a tendency exists for the systematic and deliberate broadcast of positive or neutral information about Unified Russia and negative information or information with negative commentaries about the KPRF." The daily said the legal department documents in detail TV news segments that appear to serve solely as public relations for Interior Minister and Unified Russia leader Boris Gryzlov. It said a TV viewer could "form the opinion that not a single event in the country took place without the ubiquitous Gryzlov and other Unified Russia leaders."

ORT provided close coverage of Gryzlov's recent trips to the regions during the latter half of October and first week of November, covering his visits to St. Petersburg, Cherepovets, Petropavlovsk-Kamchatskii, Kirov, and Penza. During Gryzlov's visit to a factory in Penza on 4 November, a female employee seemingly spontaneously volunteered that the Duma deputy from her district, Communist faction member Viktor Ilyukhin, has not solved the factory's problems, according to ORT.

Last week, ORT carried a report about a new book by Communist Party leader Gennadii Zyuganov called "Holy Rus and Koshchei's Kingdom," which, according to ORT, "attempts to show the spiritual proximity between the KPRF and the Russian Orthodox Church." The program then showed archival footage of the destruction of churches during Soviet rule and interviewed two historians criticizing the book.

In contrast to his counterpart in Unified Russia, Zyuganov has not managed to secure TV coverage of his trips to the region. Last month, the Perm Oblast Election Commission decided not to allow regional television company T-7 -- a VGTRK subsidiary -- to broadcast a program featuring Zyuganov, who wanted to visit that city and speak on local television. (Julie A. Corwin)

By Gregory Feifer

From the moment Mikhail Khodorkovskii's Yukos oil company came under open attack by prosecutors early last July, developments in this crucially symbolic scandal have often been gauged by the level of the Russian stock market average and appraised by analysts working for banks and funds courting western investors.

This represents nothing new and is certainly understandable in a murky country like Russia, in which, as one often hears, business and politics are inextricably linked. The West's principal interest in the country may well lie in its investment climate. In any case, the views of such researchers, many of whom have their ears well placed on the ground, certainly remain important for global policymakers seeking to comprehend events in Russia. The complications arise when such evaluations geared to influence financial markets all too often become the final say.

Some observers have recently characterized the Yukos affair as a possible boon for westernizing "reform," in sharp contrast to some of Russia's most respected political experts, who deplore the event as incontrovertible proof of President Vladimir Putin's intent of instituting a form of dictatorship.

Such splits constitute a version of an old academic debate about post-Soviet Russian development. To put it roughly, one side called for gradual change, arguing that fast reform would pass over entrenched, Soviet-era corruption. Those who won the day, however, called for instant, irreversible reform, rooted in the view that development of market economies can help create conditions crucial to building democratic institutions by laying the necessary foundation for a system in which individuals and groups can act in their self-interest. This worthy principle becomes problematic with the leap from general premise to the narrower opinion that "what's good for foreign investment in the short term is also good for democracy," or that certain economic indicators reflect the political state of affairs.

The hardy investors currently active in Russia are far from disinterested actors advocating competition and transparency. They necessarily maintain close ties to the economic and business elite. They play by the same rules of the game Russians do, and they seek the stability necessary to bring the high returns they have seen under Putin's presidency so far. To attract more investment, bank analysts routinely ascribe the best possible intentions to Putin's moves. They laud him as a sober reformer and congratulate him for taking on the corrupt business "oligarchs." They tout his most-discussed policy change, the institution of a 13 percent flat tax, a massive tax cut for the country's wealthiest, as genuinely revolutionary reform. Such views have spawned comparisons between Putin and Aleksander II, who freed Russia's serfs, and Peter the Great.

Critics of such appraisals say Putin is anything but a modernizer, to which one might add that the prevalence of the opinion that he is indicates he has hoodwinked at least some in the West better than the Soviet regime could have ever hoped to with its own disinformation. In fact, Putin has done much to reduce the influence of western models and undermine any institutions that would check the president's power. He has crippled parliament, manipulated regional elections, shut down a free national press, and strenuously worked to curb competition among the political and business elite -- the dynamic that provided the best hope Russia would evolve away from its traditional clan-based ruling system. Putin has also increased the number of bureaucrats and, judging by the growing size of average bribes, corruption. He has breathed new life into that traditional Soviet-tsarist measure for professional advancement, political loyalty, and resurrected a degree of fear necessary to maintain it.

Contrary to the views of the optimists, Putin's interest does not lie in state-building in itself. Rather, he is more concerned with the primacy of his own political power. Declaring his aim to be making Russia "great" is only a means to an end (albeit a claim he no doubt believes himself). In fact, it obscures the real, self-serving nature of his administration. Ultimately, a state with emasculated institutions, a bloated bureaucracy, a rent-seeking economy and feeble competition remains weak. In Russia's case, the spread of cash generated by high oil prices holds up the deck of cards.

The Yukos affair exploded on the world's front pages with the arrest in July of Yukos's financial strategist, Platon Lebedev, on charges of stealing state property in a 1994 privatization, and quickly expanded to include other employees and escalating accusations of murder and tax evasion. The scandal simmered until masked security agents stormed Khorodkovskii's plane in Siberia late last month, arresting him and packing him off to a Moscow prison on charges of tax evasion to the tune of $1 billion, as well as fraud, forgery, and embezzlement. Days later, prosecutors froze a large part of Yukos shares. Under Russian law, if the billionaire is found guilty, the state will take over the shares in an effective renationalization. In an attempt to save the company from that fate, but also in a bid to up the stakes and enter politics outright -- a process that may ultimately result in his martyrdom -- Khodorkovskii resigned his post as head of Yukos. Meanwhile, the government withdrew Yukos's operating rights over one Siberian oil field and threatened to remove more.

Of Russia's dozen or so oligarchs, all of whom are seen as having broken moral codes of conduct if not the fluid law itself in their acquisition of wealth last decade, why was Khodorkovskii singled out? No one reason suffices, even if Khodorkovskii's managerial and financial machinations rival the most fabulous of Russia's get-rich-quick legends. To start, parliamentary elections come in December and presidential ones next March. According to the VTsIOM-A polling agency, Putin's popularity ratings last month remained at a whopping 73 percent: crackdowns on Russia's richest resonate with the impoverished population. Khodorkovskii, worth a reported $8 billion, also funded opposition liberal and Communist political parties. He spoke out for greater economic cooperation with the West. He funded projects dedicated to helping build a civil society. He voiced high political aspirations, challenging Russia's iron-fisted presidential rule by proposing a parliamentary system. His company successfully lobbied parliament to vote for legislation in its favor. In short, Khodorkovskii trod on political territory Putin had staked out exclusively for himself. And when Yukos came under open threat, the businessman refused to toe the Kremlin's political line as he and his fellow oligarchs had previously done. He said he would face the threat of jail rather than flee abroad, a taunt that must have riled the country's law-enforcement agencies. Whatever his past reputation, whatever his real motives --vainglory or a real desire to combat Putin's authoritarianism -- he is now justly regarded as brave indeed.

But the above are chiefly symptoms of a deeper opposition. The Yukos affair also exposes a split among the political elite forming two main pillars in Putin's administration: the "siloviki" -- those in charge of the so-called "power" ministries running the police, armed forces and secret services -- and the oligarch-backed liberalizers. The siloviki represent the cadre of former KGB officers and others appointed to positions all over the state bureaucracy by a president intent on shoring up his own power under Russia's treacherous political climate. These men include Federal Security Service chief Nikolai Patrushev and former KGB agents in the top echelons of the presidential administration reputedly led by deputy heads Igor Sechin and Victor Ivanov. The liberalizers include the Yeltsin-era business elite, represented by market and legal technocrats in Putin's administration as well as Prime Minister Mikhail Kasyanov and chief-of-staff Aleksander Voloshin, who resigned last month over Khodorkovskii's arrest.

Despite antagonisms and power struggles within each camp, each side generally signifies a distinct view of Russia's future and the distribution of its economic resources. Russia's tragedy lies in the self-interest that kept members of the liberal camp, including many with the influence and inclination to stop Putin's scramble for power on the backs of the latter, largely silent. The actions of Grigorii Yavlinskii, head of the liberal Yabloko Party and one of Putin's most strident and consistent critics, are telling. Last year, Yavlinskii temporarily dropped his strident criticism of Putin, directing his ire instead at an obstructionist bureaucracy. In return, he received presidential praise and the state-controlled media spotlight. Yavlinskii remains largely outside the corridors of power, but he did the country a major disservice by helping propagate Russia's age-old "good tsar, bad boyar" myth that a greedy political elite is thwarting a benign leader's good intentions.

As a result, the siloviki continue to win the day, despite warnings to Putin that they threaten to hijack his presidency and take over the country. The unappealing fact is that the president comes from the same ideological camp. Such men share the view, for example, that the state oil pipeline monopoly Transneft should belong to the state as a means of controlling the industry (although outright renationalization has now apparently become another). Khodorkovskii loudly clamored for the government to liberalize the sector and build a pipeline to China, its biggest potential market. But Putin isn't really interested in such actions, which would help maximize profit from the oil industry. Russia makes more from oil revenues in taxes than at any point since the Soviet collapse. Yet with Yukos losing 20 percent of its share value in one day alone, Putin seems willing to risk stock market growth as well as industrial development for the sake of his own control over the country.

Another threat to the siloviki lies in Khodorkovskii's having made his company more transparent than any other major Russian enterprise. Khodorkovskii and his Menatep Bank were reviled as fabulously corrupt even before the young tycoon deviously dispossessed western investors to consolidate control over the oil company. But once safely in command, Khodorkovskii worked hard to shed his old image, declaring Yukos's ownership structure and opening the company's finances. The ploy worked; Khodorkovskii became a poster-child abroad for Russian reform and repentance. Capital doesn't hold grudges, it seeks to maximize profit. Share-prices soared.

But that move struck a massive blow to the hordes of regulators and other law enforcers who live off the bribes it takes to sustain a company pumping out 20 percent of the country's oil output. Perhaps the final straw lay in rumors that Khodorkovskii had entered talks with ExxonMobil and ChevronTexaco for the sale of a strategic stake of Yukos, reputedly for as much as $25 billion. To those running Russia's state machinery, such a deal would mean one man's appropriation of assets they understood to be theirs for the milking. The guardians of Russia's status quo allowed Khodorkovskii to remain on the stage as Russia's richest man so long as he restructured insolvent enterprises and invested in production, and paid millions in bribes. But sale to a foreign company that would likely refuse to engage in such practices threatened an end to the gravy train supporting the Putin-era bureaucracy, and is therefore seen as tantamount to treason.

Russia is fundamentally not a market economy. Putin has actually combated the stability western investors crave. Those investors are crucial for Russia to realize its hopes of economic revival, but Putin ultimately does not care about them, or about maximizing profits, strengthening the state, or even his image abroad, more than his own power. Paradoxically, in their self interest, foreign investors and their analysts have cut the president tremendous amounts of slack. But as long as the view they peddle prevails -- that Putin sees the stock market average as crucially important and that the figure reflects political and economic "reform" -- the real nature of Russian politics will never be understood, and the administration's actions will continue to come as a rude surprise.

Gregory Feifer is a former RFE/RL Moscow correspondent who lives in Paris.

11-13 November: Indian Prime Minister Atal Bihari Vajpayee to make official visit to Russia

13 November: Moscow City Court will reconvene its hearing of an appeal from Yukos security official Aleksei Pichugin

13 November: Russian cabinet will discuss pension reform and the development of the defense-industrial complex

14 November: Federal Security Services Director Nikolai Patrushev will host a meeting in St. Petersburg with the directors of all special services in all CIS countries

14 November: The 8th congress of the Russian Union of Industrialists and Entrepreneurs will take place in Moscow

14 November: Armenian Foreign Minister Vartan Oskanian will visit Moscow

17 November: State Duma deputies will return to Moscow after working in their districts

20 November: Fifth anniversary of the killing of State Duma Deputy Galina Starovoitova

21 November: State Duma to consider 2004 budget in its third reading

25 November: Russian public organizations will hold pickets and theatrical demonstrations in front of the election headquarters of candidates for the State Duma who voted in favor of allowing spent nuclear fuel to be imported into Russia

28 November: State Duma to consider 2004 budget in its fourth reading

28 November: YukosSibneft will hold shareholders meeting

7 December: Bashkortostan will hold a presidential election

7 December: Gubernatorial elections in Moscow, Tver, Yaroslavl, Kirov, Orenburg, Tambov, Sakhalin, and Novosibirsk oblasts

7 December: Perm Oblast and Komi-Permyak Autonomous Okrug will hold referendums on merging the two regions

7 December: Moscow, Yekaterinburg, and Tyumen will hold mayoral elections

7 December: Kabardino-Balkaria will hold republican parliamentary elections

7 December: State Duma elections will be held

10 December: Federation Council to set date for presidential election

11 December: Last plenary session of the current Duma

15-19 December: Chinese Defense Minister Cao Gangchuan to visit Russia

29 December: Lenin's Tomb will reopen after repair work has been completed, according to RIA-Novosti

30 December: Date by which cases against Menatep head Platon Lebedev and Yukos head Khodorkovskii are to be submitted to the courts, according to separate Moscow court decisions.