Committee for Russian Economic Freedom

Reuters recently released an article outlining three key risks in Russia: the variable price of oil, political shake up in the Kremlin and further insurgency attacks. Though the world’s largest energy producer, Russia’s manufacturing, construction and retail industries continues to contract as domestic consumption and foreign investment continues to lag, increasing the economy’s dependence on oil prices for growth.

Prime Minister Vladimir Putin remains popular and the driver behind the co-governance team with President Dmitry Medvedev. Despite highlighting their differences and indicating Medvedev’s intentions of political and judicial reform, Reuters notes that Russian markets would rebound only if Putin remained in place. The maintenance of the status quo despite Russia’s world renown for government corruption and weak rule of law seems curious. With foreign investors, such as IKEA, Hermitage Capital, and now HBK investments scaling back or pulling out of Russia due to corruption and extortion, why would the markets value Russian companies more if the status quo remained?

And how does the continued expropriation of private business by government officials add to Russia’s economic capital?

The extraction of Russia’s economic and natural resources by the politically connected few leads to only self-enrichment. Perhaps this self-enrichment would be tolerable if the proceeds were reinvested in Russia and the Russian people, but this is rarely the case. What Russia needs is investment to update oil and pipeline infrastructure, capital to encourage innovation and a stronger rule of law to benefit all Russian people.

Russia’s most famous political prisoner, Mikhail Khodorkovsky began his spirited defense yesterday against his Kafka-esque second trial. The government charged Khodorkovsky and his business partner Platon Lebedev with stealing 2.5 billion barrels of YUKOS’s crude oil or a third of the United States’ entire annual consumption of oil.

The trial is also viewed domestically and abroad as a test of Medvedev’s commitment to ending “legal nihilism” and his power and control within the Kremlin. Medvedev even started a national anti-corruption drive this March. According the Associated Press,

The trial is considered a test of whether President Dmitry Medvedev, himself a lawyer, is serious about reforming Russia’s judicial system. In other cases, judges have come forward to complain they face political pressure.

Only time will tell if Medvedev makes good on his words.

A witness in the trial of former Head of YUKOS oil Mikhail Khodorkovsky, and former Group Menatep Director Platon Lebedev, revealed in court on Monday 23rd November that a secret and illegal parallel investigation is underway for a new case against the two political prisoners, used by the prosecution to put pressure on witnesses.

Nadezhda Sheck, a former employee of the International Financial Alliance MENATEP said during her cross-examination in court that investigators: summoned her into the Prosecutors Offices on Wednesday 18th November, just two days before her testimony in court on Friday and was interrogated regarding a new investigation against Mikhail Khodorkovsky and Platon Lebedev. Ms Sheck signed a non-disclosure agreement and was prevented from sharing any additional information in court on the subject of her questioning last week.

This new information shared by the witness in open court on Monday is a clear example of how the prosecution continue to use illegal tactics and place undue pressure on witnesses before giving their testimony in court. Under Russian law, use of secret parallel investigations against defendants to obtain information or meet with witnesses in the ongoing trial is prohibited practice.

In response to the witness’ revelation, Judge Viktor Danilkin openly aided and abetted the prosecution, threatening Ms Shek with criminal liability if she discussed further details of her recent interrogation.

Commenting on the new evidence of corrupt practices by the prosecution and Judge Danilkin’s reaction, Vadim Klyuvgant, Khodorkovsky’s Lead Defence Lawyer, said:

“The whole time this second case has been going on, we have been relentlessly insisting that there is a parallel investigation taking place. What the witness Shek said – this is just one of a multitude of illustrations, evidence that there is a parallel inquiry going on – constantly, ceaselessly, secretly, and illegally.”

“…the behaviour of the presiding judge…shows a major shift in his position. If before he merely sat by silently and did not try to stop all this illegal activity by the party of the prosecution as a whole – both that of the prosecutors in the courtroom and that of the investigative bodies behind their backs, about which we are learning – today he openly aided and abetted them. He helped conceal the traces of this activity, even to the point of intimidating the witness, even to the point of obvious discrimination against the defence in relation to the prosecution during the questioning of the witness, when the prosecution has the opportunity to ask everything it wants, irrespective of whether this does or does not bear a relation to the case.”

“…the court has no right to intimidate a witness. A witness in court is obligated by law to answer all questions irrespective of any other circumstances whatsoever. Intimidating a witness with some kind of consequences of some kind of written undertaking, made with respect to some obscure case — this is simply a complete and total outrage.”