Khodorkhovski found guilty. Yukos = Enron?

Please, let’s not fall for the “the-Russians-put-their-fraudsters-in-jail-Bushco-doesn’t” line, it could not be further form the truth.
Putting Khodorkhovski in jail has little to do with fraud and everything to do with politics:

• he was challenging the Kremlin’s foreign policy by trying to promote his own, private, export routes for oil, such as a pipeline to China (Angarsk-Daqing) or a new pipleine mooted for exports to the US (going to Murmansk);
• he was actively financing the only opposition groups, such as Yabloko (the closest thing to social-democrats in the Russian context, adn the only party with serious policy proposals) and the Communists (as the only real opposition force to the Kremlin);
• by engineering the Yukos-Sibneft merger, he was creating a too-big-to-fail behemoth which could have allowed him to further increase his political power from an unassailable position (and virtually limitless funding).

While his politics were obviously self-interested (limiting taxation on his oil revenues), and his coming to fortune initially pretty murky (like all the Russian fortunes of the 90s, it was built on the appropriation on the cheap of State assets and constant piggybacking on State money or access), he was the only one of the so called “oligarchs” who was arguing for more democracy, respect of rights and the rule of law. Quite cynically, but not incorrectly in my view, he said that the rule of law, while granting him the full ownership of his own ill-acquired empire, would be beneficial to Russians as a whole, and was necessary to economic growth. The alternative would be to have another set of thieves or oligarchs replace the existing ones in an endless round of corruption to the detriment of the Russian population.

The fact that Bushco is now turning its back at Putin reflects their belated realisation that Putin, contrary to what many (naively) thought, was not going to bring any democracy of market economics to Russia. His attack on oligarchs was not a “cleaning up” move to reestablish the authority of the State and the rule of law, but a simple way to transfer Khodorkhovski’s wealth to a new group of cronies. They should be blamed for taking so long to note something that should have been expected, given Russia’s history in that respect (see that article I wrote in 2003 on that topic, initially published in the Wall Street Journal).

They were blinded by Khodorkhovski’s skillful promotion of Russia as a reliable supplier in the oil& gas business, which was initially backed by Putin’s decision to cooperate with the US after 9/11 and to appear as a stable partner in general. When Putin’s policies started to deviate from full submission to the White House’s goals (viz. Iraq, Iran, in Georgia or elsewhere), the Yukos/Khodorkhovski affaire was used as a pretext to bash Putin.

Which brings us back to Enron:

• Enron was a case of a businessman who had effectively bought top politicians and expected that this allowed him to keep on going with ever crazier shenanigans and outright fraud without consequences. Enron’s bosses were  subversient to the politicians, useful for their money, and given favorable laws in return, but they were expandable, and they were duly “expended” when they became liabilities. The Justice system did its work and fraud was uncovered and more or less punished.
• Khodorkhovski is the case of a businessman who was a force of its own, fighting it out with the politicians for the resources of the country, taking a politically independent view and fighting for that view as much as for his company. He was not expandable to the politicians, he was the enemy. He was “expanded” but it took a lot of effort and pain to take him out of the game. “Fraud” was conveniently extracted from the recent past when not a single business transaction in the country was legal, and nobody in its right mind will say that the Justice system did naything but a politically motivated hunt.
• Enron was a loss making company that used fraud to hide its losses, and destroyed value for everybody: shareholders, workers and costumers;
• Khodorkovski used fraud and all the other ways then prevalent in Russia in the nineties to grab some assets, but he made them valuable. When people note that he owned a 50 billion dollar company (at its peak value) that he purchased for only 150 million dollars in rigged transactions in 1996, they forget to mention that the company was still worth only a few hundred million dollars in 1999, and that it was his decision to bring in Western financial and engineering know how, to open up the accounts of the company and to pay generous dividends that attracted investors and created value (higher oil prices also helped, obviously). He did have a real positive impact on his company, once it was his, and on the whole industry in Russia.

Now, the irony is, of course, that Khodorkhovski will spend several years in jail – which is the best thing that can happen to his political career, as the image of his politically motivated jail time is the best way to tune out his previous (rightly deserved) image as robber baron and thief of the wealth of the Russian people. I expect that he took a conscious decision to go to jail (I know that he was offered a nice chunk of money and a golden exile to give up Yukos without fighting – and he refused) and that he will emerge as one of the most serious contenders for the Russian Presidency in 2012 or 2016. Of course, a lot can happen in the meantime.