Time

The reasons for his move, as well as his haste, are the typical worries of the young entrepreneurs […]: corruption and bureaucracy, the forces that are driving the biggest exodus since the fall of the Soviet Union. […] Now the country is stable and the cities are thriving. But small-business owners seem to feel less safe than ever.

Shuster cites data that shows Russians paid nearly $600 million in bribes to authorities for “security provisions,” in 2010 – 13 times more than in 2005 – and then describes the calamity that befalls business owners if bribes aren’t paid: visits from inspectors, auditors or the police until the company is overwhelmed. If that doesn’t work, expect a corporate or government raid to follow, as was the case in 2000 for NTV television or in 2003 for Yukos Oil.

Earlier this year, Agava, one of Russia’s leading web hosting companies was raided by police, its server farm raided just weeks later. And this is happening , Shuster writes, while the Russian government is trying to enlist businesses to move to Skolkovo, Russia’s notional version of Silicon Valley. But the businesses that have signed on for Skolkovo are, not surprisingly, having trouble recruiting talent.

To drive the point home, Shuster quotes a California venture capitalist, Alexandra Johnson, who advises Russian businesses. “You need an entire ecosystem to support innovation,” she says. “You need incubators, entrepreneurship, managers to run the businesses. You need the rule of law. Many elements of this ecosystem are still missing in Russia.”

Read Shuster’s full article here.

Russia’s currency reserves are buffered by the high price of oil, but that usually meant a stem in capital outflows. Not so this year. Evsey Gurvich, head of the Economic Expert Group in Moscow cites political uncertainty in the 2012 presidential elections as one of the reasons for capital flight,

In our country, personal guarantees, personal relations, are still more important for big businesses than laws and rules and formal regulation.”

Another reason he cited was the “weak business environment” in Russia due to the pervasive corruption and expropriation of private business by government officials.

That is another way of talking about corruption, bureaucratic capriciousness and courts that take their orders from on high.

The reaffirmation this week of the conviction of Mikhail B. Khodorkovsky, the onetime oil tycoon who lost his company and his freedom after he challenged Putin, probably translates into “several more billion dollars on the run from Russia,” Gontmakher said.

Domodedovo Airport, the only privately owned airport in Moscow, has come under relentless pressure publicly from the authorities, and that, [Yevgeny] Gontmakher, [deputy director of the Institute of Contemporary Development in Moscow] said, sets a very visible and “awful” example.”

The EU Parliament points out that Russia, as a member of the Council of Europe, has signed up to fully respecting European standards as regards democracy, fundamental and human rights and the rule of law.

Watch the debate that preceded the passing of this motion and see the EU Parliament resolution below.

EU Parliament’s Resolution on the Rule of Law in Russia

Defense Slams “Charade of Justice”

Reuters

New York, December 27, 2010 – Today a Moscow court found Mikhail Khodorkovsky and Platon Lebedev guilty of embezzling a staggering two thirds of the total production of the Yukos Oil Company over a six-year period. The conviction in this 22-month mock judicial process confirms the subservience of the judicial system in Russia to corrupt officials who continue to view Khodorkovsky as a threat and who seek to prevent his scheduled release in 2011. Khodorkovsky is already serving an 8-year sentence, handed down in 2005, but dating from his arrest in 2003. Had he been found not guilty he would have been released in 2011, a few months before Russia’s 2012 presidential elections. The new unlawful prison term will be announced either this week or shortly after the Khamovnichesky Court reconvenes from holidays in mid-January. Prosecutors have asked for 14-year sentences for Khodorkovsky and Lebedev.

According to lead defense lawyer Vadim Klyuvgant: “The trial was a charade of justice, the charges were absolutely false, but I fear the sentencing will be very real.”

The behavior of the prosecutors and of the judge turned the trial into a fiasco. Despite filling time by reading from a 188-volume case file, and parading numerous witnesses into court, prosecutors were unable (and did not even try) to prove how it was possible that Yukos covered its operating costs, invested heavily in capital expenditures and acquisitions and paid taxes and dividends when the entire oil production of Yukos over a six-year period was being stolen, as alleged in the indictment. At the end of the trial, prosecutors further confused their case when they attempted to save face by reducing the volume of oil allegedly stolen by approximately one third.

“This verdict diminishes Russia’s legitimacy in the world stage and signals to policy makers and investors that Russia’s political leaders apply the law as they see fit,” said Pavel Ivlev, former corporate counsel to Khodorkovsky.

The authorities misleadingly attempted to portray the process as legitimate. The defendants were permitted to speak in court almost without restrictions, but the judge blocked their lawyers from introducing exculpatory documentary evidence and refused to hear many witnesses and experts. Illusions of adversarial process and legitimacy were created by allowing the defense to file motions and objections to serious procedural violations, however the judge routinely quashed the vast majority of these motions and failed to react to the objections. The defense and the defendants persisted to the end in doing anything they could to document the full extent of the mistrial, and have publicly released online all submissions rejected by the court.

The verdict in this trial is based on patently false allegations that are incompatible with the first case against Khodorkovsky and Lebedev and with the enormous tax claims that bankrupted Yukos to the benefit of persons controlling state-run Rosneft. The conviction is also impossible to reconcile with numerous decisions of Russian courts that have recognized the tax claims against Yukos. Today’s ruling also contradicts Russia’s official position as it attempts to defend its treatment of Khodorkovsky, Lebedev and Yukos before the European Court of Human Rights. There, the Russian authorities allege that it was lawful to impose grossly punitive taxes on proceeds from the sale of oil owned, sold and accounted for by Yukos. On the other hand, in the Khamovnichesky Court the prosecutors allege on behalf of the Russian Federation that the same oil was stolen from the company by Khodorkovsky and Lebedev, and therefore could not have been sold by Yukos. The court supported the slanderous allegations of oil theft despite the fact that the so-called “injured parties”, production subsidiaries of Yukos, received not only full compensation for their production costs but also 2 billion USD profits from sales.

Politically it is notable that in the most high-profile trial in Russia, closely-watched by the public and media all over the world, the court could so openly ignore applicable procedural and substantive laws as well as basic notions of fairness. This is testament to the power of those corrupt officials who zealously seek to justify their seizure, control and ownership of Yukos assets and to isolate Khodorkovsky and Lebedev from Russia’s business and public spheres – and to keep them in jail as long as possible to achieve these goals. Prime Minister Vladimir Putin’s most recent (but far from the first) public intervention in the case and undisguised pressure on the court came in televised remarks on December 16, 2010, one day after a last-minute postponement of the reading of the verdict to December 27, 2010. With the judge still deliberating on the case, the Prime Minister directly mentioned the current charges and stated that Khodorkovsky’s guilt had been proven in court and that he must stay in jail.

The trial and its verdict are an open challenge – and indeed an affront – to President Dmitry Medvedev’s highly-publicized efforts to ensure the rule of law and to reform Russia’s criminal justice system and to fight government corruption. If upheld on appeal, this verdict shall be a triumph of corrupt officials controlling Russia’s law enforcement and judicial bodies, and a setback for an entire country that aspires yet continually fails to modernize.

Perception is based on reality and a whistleblower came out today to implicate Prime Minister Putin at the top of an elaborate multiyear scheme to extract contributions from Russian businessmen. Sergei Kolesnikov, a business associate of Putin, has offered the most detailed description of how Putin has engaged in a combination of corruption, bribery and theft to amass his own personal wealth. Read the letter here.

In the open letter to President Medvedev, Kolesnikov reveals Putin’s secret funding network. This letter was delivered Tuesday to the Russian U.N. mission in New York. Two or three times a year Kolesnikov regularly briefed Putin on his personal wealth accumulated through contributions by businessmen. Washington Post columnist David Ignatius wrote today that “it’s one of the most detailed allegations I’ve seen of the links between Putin and Russia’s “crony capitalism.”

Additional reporting by Ellen Barry at the New York Times show how corruption and politics prevent uncovering the truth about the death of Sergei Magnitsky. Contradictory official statements and lack of oversight have prevented the truth to be known. President Medvedev established the Public Oversight Commission to look into the case but after an initial thoughtful review was hijacked by security forces.

These same Federal Security Service (FSB) forces also known as the siloviki are the subject of an article in the New York Review of Books which refers to them as the New Nobility in Russia. In the assessment the FSB runs the country with Putin at the top.

…the FSB focuses its efforts on protecting the Kremlin’s vast economic interests, suppressing legitimate political opposition, and ensuring the Kremlin’s control over the press and television through intimidation and violence.

US Senator John McCain recently said at a speech at John Hopkins University,

And then there is the sad ongoing saga of Mikhail Khodorkovsky, whose company was stolen from him, and who has languished in jail for seven years.  When his sentence expired recently, new charges were manufactured against him. He is not being tried by a jury, just a single judge, and the political fix has been in for a long time. He could now face up to 12 more years in prison. If ever there were a case of ‘legal nihilism’ – of an affront to the very values of equal justice that we hold dear – the case of Khodorkovsky is it.

David Remnick, editor-in-chief of the New Yorker, wrote the lead Talk of the Town article this week when he addressed the issue of the Khodorkovsky trial and what it means for Russia’s future

Khodorkovsky exploited the lawlessness of the era no less than his fellow-oligarchs did, but he was more reserved than the rest…Over time, he also displayed unusual signs of independence from his Kremlin patrons. And, for Putin, there was the rub. Khodorkovsky began to see the necessity of playing a less sleazy game—not least in order to attract foreign investors…
The Khodorkovsky affair long ago erased any notion in Russia of an independent judiciary; it made plain that the courts do the bidding of a corrupt hierarchy that will stop at little to enrich itself.
Russia undermines its pretense to modern statehood with such an appalling abuse of state power. Putin’s ruthlessness is apparent. President Dmitry Medvedev ostensibly has the power to pardon, and he has shown some small measure of independence from his patron, speaking of the “legal nihilism” that prevails in Russia today. Does he have the capacity, much less the courage, to release Mikhail Khodorkovsky?

In his article, “What now for Russia? Part Three” Anthony Harrington argues that not only does the Khodorkovsky trial blatantly flaunt the rule of law, the actions of Khodorkovsky and his business associates indicate that he was getting Yukos in financial shipshape for a possible sale to foreign investors and listing on the New York Stock Exchange.
Which leads us to the question of what does the postponement mean? While reading into the nondecision is a little like reading tea leaves, it is probably safe to say it indicates a neutral or negative final outcome. With the delay, the authorities may try to mitigate negative public reaction to a guilty verdict. Alternatively, it could be that the judge, who obviously had made his own opinion so far, was unable to get approval from his supervisor. Or it could be something else more germane, such as needing more time to write the decision. Ultimately, the postponement demonstrates to the world that Russia’s judicial system is far from independent.

Pavel Khodorkovsky and Mikhail Kasyanov

On Friday, October 22, former Russian Prime Minister Mikhail Kasyanov spoke about the potential for political change in Russia at Columbia University’s Harriman Institute. Some issues he mentioned included the need for political opposition, rule of law and greater foreign investment in Russia. Kasyanov also mentioned the need for Russia to have an active political opposition, something Russia currently lacks. Over 100 people came to listen to the potential 2012 presidential candidate as he described a Russia that leads through example and cooperation, not words and intimidation.

Foreign investors are finicky and there are a lot of options. Last week, Transparency International released their latest Corruption Perception Index and Russia dropped to 154th out of 178 countries, making it the most corruption country in the G20.

RUSSIA’S GOVERNMENT has calculated that it needs better relations with the West to attract more foreign investment and modern technology, according to a paper by its foreign ministry that leaked to the press last month. Prime Minister Vladimir Putin has recently made conciliatory gestures to Poland, while President Dmitry Medvedev sealed a nuclear arms treaty with President Obama. At the United Nations, Russia has agreed to join Western powers in supporting new sanctions against Iran.

Moscow’s new friendliness, however, hasn’t led to any change in its repressive domestic policies. The foreign ministry paper says Russia needs to show itself as a democracy with a market economy to gain Western favor. But Mr. Putin and Mr. Medvedev have yet to take steps in that direction. There have been no arrests in the more than a dozen outstanding cases of murdered journalists and human rights advocates; a former KGB operative accused by Scotland Yard of assassinating a dissident in London still sits in the Russian parliament.

Perhaps most significantly, the Russian leadership is allowing the trial of Mikhail Khodorkovsky, a former oil executive who has become the country’s best-known political prisoner, to go forward even though it has become a showcase for the regime’s cynicism, corruption and disregard for the rule of law. Mr. Khodorkovsky, who angered Mr. Putin by funding opposition political parties, was arrested in 2003 and convicted on charges of tax evasion. His Yukos oil company, then Russia’s largest, was broken up and handed over to state-controlled firms.

A second trial of Mr. Khodorkovsky is nearing its completion in Moscow, nearly a year after it began. Its purpose is transparent: to prevent the prisoner’s release when his first sentence expires next year. The new charges are, as Mr. Putin’s own former prime minister testified last week, absurd: Mr. Khodorkovsky and an associate, Platon Lebedev, are now accused of embezzling Yukos’s oil production, a crime that, had it occurred, would have made their previously alleged crime of tax evasion impossible.

Mr. Khodorkovsky, who acquired his oil empire in the rough and tumble of Russia’s transition from communism, is no saint, but neither is he his country’s Al Capone, as Mr. Putin has claimed. In fact, he is looking more and more like the prisoners of conscience who have haunted previous Kremlin regimes. In the past several years he has written numerous articles critiquing Russia’s corruption and lack of democracy, including one on our op-ed page last month.

Mr. Obama raised the case of Mr. Khodorkovsky last year, and the State Department’s most recent human rights report said the trial “raised concerns about due process and the rule of law.” But the administration has not let this obvious instance of persecution, or Mr. Putin’s overall failure to ease domestic repression, get in the way of its “reset” of relations with Moscow. If the United States and leading European governments would make clear that improvements in human rights are necessary for Moscow to win trade and other economic concessions, there is a chance Mr. Putin would respond. If he does not, Western governments at least would have a clearer understanding of where better relations stand on the list of his true priorities.

"Territory of Liberty" by Julia Aryeh

Panel Discussion: The Khodorkovsky Trial – Human Rights and Economic Freedom in Russia

Venue: Dorot Center, 171 West 85th Street, New York, NY

Date: Tuesday, May 18th at 3pm

Sponsors: Committee for Russian Economic Freedom, Andrei Sakharov Memorial Museum, Institute of Modern Russia and Drawing the Court

The ongoing trial in Moscow of Mikhail Borisovich Khodorkovsky symbolizes the challenges all Russians face as they seek to build a society free of fear and corruption. In conjunction with the US premier of Sketches of (in)justice: The Khodorkovsky Trial from Putin to Medvedev, the Institute of Modern Russia is sponsoring a panel discussion in which leading human rights and legal experts will discuss the case’s social, political and economic implications.

Panelists will include Karinna Moskalenko, director of the International Protection Center and notable expert on international human rights who will provide an update on international human rights advances in the US Congress and other legislatures. Additionally, Ms. Moskalenko will provide context to YUKOS v Russia a pivotal international case currently being deliberated in the European Court of Human Rights. She testified before the US Congress on May 6 about Russia’s human rights transgressions.

Sergei Lukashevsky Director of the Andrei Sakharov Center (Moscow) will discuss the human rights situation in Russia specifically and the latest efforts by the Sakharov Center to preserve historical memory of the victims of political repression at the hands of the Soviet regime and promote an open democratic society and state in Russia. Mary Holland, NYU Law’s Director of the LL.M. Lawyering Program, will provide a legal context for recent legal developments in post-Communist Eurasian countries and its impact on efforts in the region to improve human rights. Pavel Khodorkovsky, president of the Institute of Modern Russia will discuss how his organization will continue the efforts of his father who strived to modernize Russia through education and opportunities for young people.

Moderating the panel is Pavel Ivlev, chairman of the Committee for Russian Economic Freedom (CREF) and a long-time legal counsel to YUKOS and its former CEO, Mikhail Khodorkovsky, who fled to New York from Russia under fear of unjust prosecution. Through his efforts and the CREF organization, Mr. Ivlev has raised the awareness of the risks of doing business in Russia and how the release of Mikhail Khodorkovsky would be a signal to the international investment community at Russia is back in business.

Admission: Free and open to the public.
General Information: Dorot Center, 171 West 85^th Street, New York, New York, 212-769-2850.