Russia's New Power Struggle

...He bought into the so-called"voucher privatization" of the early Yeltsin years, amassing on the cheap a big stake in Russian industry...

...At this point the plot thickens...

...to all intents and purposes those assets were simply given away to a favored few who happened to have a head start and the right connections...

...After experimenting in financial manipulation, Khodorkovsky set up one of Russia's firstprivate banks, Menatep, the base for his business empirebuilding...

...The West and, possibly, Western money," he said, "always stood behind the losers" (i.e...

...Enter another rising young oligarch, Roman A. Abramovich, seemingly eager to profit from the distress ofhis fellow mogul...

...The oil industry, which the oligarchs have collectively monopolized, is a big prize...

...This provides for half of the 450 Duma seats to be filled from single-member districts, and the other half to be distributed proportionally according to the number of ballots cast for each nationwide party list that passes a threshold of 5 per cent of the total vote...

...In particular, though, he has been picking ofTcertain oligarchs, starting with the media barons Vladimir A. Gusinsky and Boris A. Berezovsky, who fled abroad to avoid arrest...

...there is an inherent tension between the two...

...Thus the government has an absolute majority in the Duma for the first time since the fall of Communism...

...The new billionaires won control of more than 50 per cent of Russia's economy, and even larger shares in the critical sectors of banking, oil production and the mass media...

...In any case, Abramovich and Sibneft are already being investigated by the State Auditor and could well be the next victims in Putin's efforts to put Russian oil back under state control...

...Because only four parties made the cutoff, United Russia's allotment of the proportional seats came to 120...

...Russia's President appears to realize that authoritarian government does not have to be totalitarian—that is, it does not need to suppress every vestige of independent thought, organization and property...

...Its co-leaders are Dmitri Rogozin, chair of the National Defense Committee in the outgoing Duma, who is of a nationalist persuasion, and Sergei Glazyev, an economist of a Social Democratic coloration who quit the Yeltsin government to protest its shelling Parliament in 1993...

...Oligarchy Russia's New Power Struggle By Robert V Daniels Vladimir V. Putin is now poised to become Russia's most powerful ruler since Mikhail S. Gorbachev began to undo the Communist Party's authority in the 1980s...

...petroleum giant seeking to establish a strategic foothold in Russia's oil-rich future...

...His objective is retrieving the levers of power in private hands...

...The breakaway Motherland bloc, combining nationalistic and socialistic elements, took9per cent ofthe vote, while the regular Communist Party at 13 per cent captured most ofthe rest ofthe previous Communist electorate, after being pounded in the media and having some of its candidates thrown off the ballot by local election commissions...

...Putin has an extraordinary political sense...

...From that point on, the only way to go was up...

...A bigger surprise was the Kremlin's success in splitting the Communists' ranks...

...If serious challengers like Khodorkovsky arise, they can be picked off individually...

...As far as is known publicly, President Bush complained personally to Putin only in one tut-tutting telephone call more than a month after the Khodorkovsky affair broke...

...Apparently he hoped this would give him immunity from any prosecution...

...Robert V Daniels, a frequent NL contributor, is professor emeritus of history at the University of Vermont...

...All of them amassed their vast holdings by the shadiest of dealings during the 1990s, when they became the prime beneficiaries of Yeltsin's crash program to privatize enterprises inherited from Soviet socialism...

...At 41 he is relatively young, as are most of Russia's new business moguls...

...Actually, UnitedRussia's gains resulted from the clumsy electoral process, adopted in the 1993 Constitution, modeled on the German and Italian proportional representation system...

...In 1995, when the Yell· sin government launched its "loans for shares" scheme to shore up the budget, Khodorkovsky won" control of the country's second-largest oil company, Yukos...

...In a way, Russia has been thrown back to a sort of feudalism, where the king was challenged only by his big barons...

...That was more or less a shotgun wedding, after Putin frightened the latter group by flirting with the Communists...

...The country's unpalatable choice, as the space for genuine democracy sadly narrows, seems to be either autocracy or oligarchy...

...And right before the Duma contest Minister of the Interior Boris Gryzlov declared, "Russia's natural resources should not belong to companies or private individuals but to the Russian people"—a highly popular position...

...Yet even so the industry supplies 40 per cent of the state budget...

...But they also highlight the domination of Russia's economy and the warping of its politics by a few egomaniacal business freebooters...

...Russian political culture allows a leader who wins legitimacy by resolute action to enjoy authority even beyond the preponderance of presidential power provided in the Yeltsin Constitution...

...Now headed for an easy first-round victory on March 14, Putin has virtually a two-thirds majority in the Duma...

...He came to maturity in the 1980s, when the loosening of the Soviet system was opening vistas to individual advancement...

...No democracy existed under the Communists, and now, with the rise of the business oligarchs on the one hand and the government of the siloviki—the "men of force" from the police and military—on the other, real democratic values in Russia have been caught in a new squeeze play...

...None of the Above," democratically recorded under the Russian system, actually came in fifth, with almost 5 per cent...

...Putin has already shown his readiness to take on the oligarchy's economic power by resorting to police power...

...But for Putin such a scenario would be hard to tolerate, because Western equity in Russian oil would prevent his controlling the industry, whereas the tycoon's holdings could be had for nothing through confiscation in a criminal case...

...Historically capitalism, particularly big corporate capitalism, has sometimes coincided with democracy but sometimes not...

...Kremlin intrigue remains as hard to untangle as the behind-the-scenes struggles among the old Soviet elite...

...In that frantic effort to make the collapse of Communism irreversible there was no way to find bona fide buyers for state property...

...With barely half the electorate turning out, United Russia secured just 3 7 per cent of the vote...

...Although the government fired a warning shot last July when it arrested the head ofhis bank, Platon Lebedev, on pretty much the same charges that were subsequently brought against him, Khodorkovsky seemed not to get the message...

...MOTHERLAND is worth watching as a bellwether of Putin Administration policies...

...ForKhodorkovsky, this might have been a way to unloadhis stake in Russian oil, have the proceeds deposited to his account in a Western bank, leave the country, and live happily ever after...

...There is some speculation that, already fearing this, he intended to sell his holdings back to the enlarged oil company and emigrate with the proceeds...

...Reflecting these sentiments in a postelection statement, Rogozin targeted "bandit capitalism and its result: the impoverishment of the people, the humiliation of the country...

...Western governments have been more subdued about Khodorkovsky than the media...

...or because Voloshin, who was fired after protesting Khodorkovsky's arrest, represented the wrong Kremlin faction...

...Putin was tapped by Yeltsin as prime minister and then acting president in 1999, with the mission of protecting the "Family"—the presidential entourage of aides, relatives and business cronies— against the Communists and other foes of privatization...

...A one-time associate of Berezovsky, Abramovich had an equally shady record in his own quest for riches...

...His numerous books include Russia's Transformation and The Soviet Trajectory (forthcoming...

...Gusinsky, Berezovsky and now Khodorkovsky have been too successful for their own good...

...It was political because he was no guiltier than any of the other oligarchs...

...Russia rivals Saudi Arabia as the biggest petroleum exporter in the world, and oil export income is the key to economic recovery...

...In fact, the Kremlin would have at its disposal three decisive instruments of power—the police, the media and the economy...

...The party says it will be in the opposition in the new Duma, but in contrast to all the authentic opposition parties it did not denounce the December election's outcome...

...Hints of "deprivatizing" former state properties have occasionally emanated from the Kremlin...

...As long as the regime effectively controls the tools of power—the TV, the police, and the oil revenues—responsible opposition can be marginalized or drowned out...

...Glazyev, proposing to charge the oil companies "rent" for using the nation's natural resources, decried "the irresponsible course under which oligarchs fill their pockets at the expense of socialjustice...

...But he has made no secret of favoring the United Russia Party, which happens to be united on only one thing, support for him...

...Other than his commitment to the greater glory of the Russian state (and his own part in it), Putin seems essentially an opportunist...

...When ExxonMobil shied away from the Yukos deal, Abramovich sought to get control of the sinking firm by arranging a merger with his own smaller oil company, Sibneft, to create the country's largest petroleum combine...

...But he stepped over the line when he began lobbying the Duma for legislative benefits and funding opposition parties, even the Communists...

...Motherland may well serve as Putin's spearhead in his sharpening confrontation with the dozen or so immensely wealthy individuals who make up Russia's business oligarchy...

...Predictably, Communist leader Gennady A. Ziuganov called the election "a shameful farce," and claimed ironically to be Russia's last defender of democracy against a looming "police state...

...he prefers to stay above the political hurlyburly and maintain the posture of a divineright monarch...

...That is a misconception...

...So immediately after Khodorkovsky's arrest his shares in Yukos were frozen, blocking his attempt to transfer them to his friend Leonid Nevzlin, now in Israel...

...With an ear cocked for Western financial opinion, Putin has in general abjured such sentiments...

...The Russian oligarchs have often been likened to the 19th-century American "robber barons...

...Besides, the pro-Putin total reflected the merger in 2000 of the old government Unity Party, with the Fatherland-All Russia bloc of Moscow Mayor Yuri M. Luzhkov and former Prime Minister Yevgeny M. Primakov...

...Some of the party's deputies are openly anti-Semitic...

...A with several of the oligarchs, he happens to be partly Jewish, a point that enhances the popularity of Putin's opposing tactics...

...With additional support from independents as well as Motherland and Zhirinovsky, he could (though he disclaims such intent) have the Constitution amended to enable him to run for a third term in 2008—or even have his term extended from four to seven years...

...But Berezovsky seemed to play a similar role under Yeltsin, and Abramovich could also become too big for his own good...

...Khodorkovsky is the third to be targeted, and probably not the last...

...He and his team have proved to be masters of the politics of divide, co-opt and conquer—"managed democracy," in Russian parlance...

...Taking a leaf from his predecessor, President Boris N. Yeltsin, Putin has avoided any formal leadership of a party...

...This is a projection of the undiscriminating mythology about "democratic capitalism" and "market democracy" that has underlaid American perceptions of post-Communist Russia and most advice to its rulers...

...Quite the contrary: They are plunderers who have stashed their winnings abroad...

...What probably triggered Khodorkovsky's political execution was a deep concern about his maneuvers at Yukos...

...Emerging from the nest of the Communist youth organization, the Komsomol, he personified what might be called "ambition overhang," by analogy with the "inflation overhang" of the Gorbachev era that denoted frustrated personal energy breaking through the restraints of the old order...

...Both failed to get the 5 per cent of the total vote required to qualify for the proportionally distributed Duma seats...

...It is a certainty that he will be resoundingly re-elected president on March 14, and the new Duma chosen this last December has given him a legislative branch set to do his every bidding...

...This despite all the pressure the government applied through the state-dominated television networks and the machinations of provincial governors (actions criticized by observers from the Organization for Security and Cooperation in Europe and the Council of Europe as "fundamentally unfair" and "a regression in the democratization process in Russia...

...If the state can regain full control, it will have its hands on the major domestic source of capital and be able to rule the economy without bothering the other privatized enterprises...

...or because Putin wanted to avoid any impediment to his taking over Yukos...

...It is not surprising, then, that Putin has set his sights on Khodorkovsky...

...By the best estimates, capital flight over the last decade has run up to $ 100 billion a year...

...The essence of Putin's tacit deal with the oligarchs once he assumed the presidency is well-known: I will leave you alone despite the circumstances of your enrichment, if you stay out of politics...

...Khodorkovsky's arrest was blatantly political, but not because he was necessarily innocent of the charges brought against him...

...Indeed, Russians today speak of the semibankirshchina—rule by seven bankers— a reference to the semiboyarshchina— rule by seven boyars in the 16th century...

...He tried to offset his past by getting himself elected governor of the forlorn Chukchi region at the extreme eastern tip of Siberia (no local residency is required in Russia, only enough cash...

...One real change registered by the election was the eclipse of the so-called "liberal" parties, Yabloko and the Union of Right Forces...

...Adjudged in one Russian rating to be the second most powerful man in the country next to the president, Khodorkovsky tried to polish his image with various philanthropic gestures...

...Meanwhile, in much of the Western media Khodorkovsky has become a hero of democracy, battling creeping authoritarianism...

...But the merger deal broke down, either because the remaining Yukos stockholders resisted his plan to make Putin's ex-chief of staff, Aleksandr S. Voloshin, chairman of the board...

...He is patient, knows his strengths and weaknesses, and seizes opportunities unhesitatingly...

...It has been suggested that Abramovich is a tool of the Kremlin, being used to pull down more dangerous oligarchs...

...No grand principle, such as rolling back capitalism, is driving Putin's strikes against the oligarchs...

...As a chorus of Western critics rightly charged, this was another step back toward the authoritarian concentration of power in the Kremlin...

...Khodorkovsky's arrest and relatedmoves against some of his subordinates raise troubling questions about Putin's professed dedication to the rule of law...

...Its victory in the December parliamentary elections, though, was not quite the smashing triumph for Putin that most commentators in Russia and abroad have represented it to be...

...Perhaps expecting to suffer the fate of Gusinsky and Berezovsky, he began negotiationsearlylast yeartosellhis personal stock in Yukos ($10 billion worth)to ExxonMobil, the U.S...

...Washington evidently hopes to salvage its odd entente with Russia by looking the other way in the matter of the oligarchs, in order to advance its strategy of splitting Europe by wooing Russia, ignoring Germany and bashing France...

...Rogozin even attacked Western election observers for "direct interference" in Russia...

...They are the one force that can counterbalance Putin's dominance of the political arena...

...Putin understands what a Russian political scientist once told me: "In Russia legitimacy is not the same thing as legality...

...A second surprise was the size of the protest vote for the resurgent zany-fascist Vladimir V Zhirinovsky and his Liberal-Democratic Party, at 11.5 per cent close behind the Communists...

...But he has been a less than reliable protector...

...the liberals...

...No wonder Russia outside of Moscow is depressed and impoverished...

...The Russian oligarchs have not earned their wealth by building the economy through industrial development...

...Of the single-member districts it ended up with roughly 180, counting independents who pledged to back Putin...

...That was made ominously clear in October when Russia's richest man, Mikhail B. Khodorkovsky, was arrested and jailed on charges of fraud and tax evasion (to the tune of $5 billion...

...Then, says the eminent Russian political scientist Dmitri Furman, he can "stay in the Kremlin as long as he wishes—most likely for life...

...Putin has tried various devices to recapture some of the leakage of this resource, including rules to convert foreign exchange earnings into rubles and the imposition of an oil export tax, with limited results...