A trial against popular opposition leader of a new generation, Alexei Navalny, continues in Kirov. Four years ago a company of Navalny’s acquaintance bought a medium lot of wood and then sold it with a 7% margin. According to the state prosecutor, Navalny and his friend “have stolen all the wood”. This is only one of five investigations against the opposition leader.
Navalny case will determine the investment climate in Russia for many years
Politically motivated persecution of Mr. Navalny will further undermine Russia’s unwelcoming investment climate. Any businessman could be accused of embezzling all his revenue and locked into prison for many years. According to Alexei Kudrin, Putin’s Minister of Finance in 2000-2011, this trial puts at risk the foundations of the market economy in Russia, including the freedom to sell and buy goods and services. Any verdict will influence the willingness to start new and invest in existing ventures, continues one of the most trusted Putin’s allies.
The Navalny case resembles the campaign against YUKOS, when the largest and most efficient Russian oil company was ruined in several months. Ten years ago, pro-Putin liberals hoped that the prosecution of Khodorkovsky would be an exception. However, the conviction of YUKOS owners and management opened the Pandora box of unlawful expropriation. “Siloviki” employed the technology from the YUKOS case to acquire thousands of large and small companies. Thousands entrepreneurs were imprisoned or squeezed out the country by Russian legal system.
The charges against Navalny reproduce the logic of the second Khodorkovsky’s trial, in which former tycoon, his partners and managers were accused in embezzlement of all oil produced by YUKOS. Two processes also share similar politically motivated goals. Nobody in Russia doubts that Kremlin will lock Navalny out of the legal political process. Khodorkovsky’s case ten years ago harmed Russia’s investment climate a lot, but high oil prices, Kudrin’s macroeconomic stabilization and the effect of Yeltsin’s market reforms cushioned all the negative impact. Now Russian economy approaches stagnation and after the government convicts the freedom of entrepreneurship one more time, it may well head to a hopeless recession. Siloviki and state-owned companies will be the only entrepreneurs left in the country.
The New York Review of Books
Gennady Gudkov
As the Putin regime continues its crackdown on the growing opposition movement, a former KGB comrade of the president is now in trouble, with his family business “all but ruined by a blizzard of state inspections,” writes Fred Weir in the Christian Science Monitor.
Gennady Gudkov, a businessman and member of the “loyal opposition” in the Duma has been speaking at recent protests in the capital, hoping, as Weir reports, “to steer the protesters toward peaceful and constructive engagement with the authorities.”
But the Kremlin doesn’t see it that way. Russian bureaucrats have targeted his security firm, which has recently been visited by the police, fire department and the Moscow architectural control committee, leading to the suspension of its license for employees to carry guns and forcing him to sell his company at a loss.
“I took the path of Khodorkovsky,” Gudkov said, “and now I am really afraid.”
Read more here.
Bloomberg reports that Russia’s commissioner for business rights believes freeing Mikhail Khodorkovsky as part of an amnesty program for people convicted of economic crimes would send a positive signal to investors.
Boris Titov, interviewed at last week’s St. Petersburg International Economic Forum , said he will proposed that President Putin grant amnesty to some 13,000 people jailed for economic crimes, including Khodorkovsky:
For the investment climate, [releasing Khodorkovsky] would be good news. This should be just and the right decision. [Khodorkovsky] has been in prison too long. He did something, others also did, but nobody else is serving such a sentence.
While it’s doubtful that Titov’s views will come to fruition any time soon, the fact that he is pledging to improve the way the state handles economic crimes is a positive sign.
Mikhail Khodorkovsky in 2010
In a letter this week to the head of Russia’s Supreme Court, former Yukos chief Mikhail Khodorkovsky called for the annulment of his second conviction on trumped-up charges.
Last month a lower Supreme Court judge upheld the sentence, originally handed down in 2010. Late last year Khodorkovsky completed the term of his first conviction.
Khodorkovsky notes in the letter that his case “has acquired a symbolic meaning for millions of entrepreneurs, executives and all the educated and concerned citizens of Russia” – themselves harmed by the outcome of his case, as “thanks to it, the rate of much needed economic growth has been lost.” Russian equities continue to lag behind their BRIC counterparts thanks to what a number of analysts have termed the “Khodorkovsky discount.”
More on Khodorkovsky’s letter here. Read the full text of the letter here.
Mikhail Khodorkovsky
In a piece published in TIME magazine in time for Vladimir Putin’s inauguration, jailed former Yukos chief Mikhail Khodorkovsky writes about the lack of rule of law in Russia and how individuals looking for justice there can’t count on the judicial system, which remains under Putin’s influence.
“Perhaps an individual judge may be biased,” he writes,
but the judicial system as a whole can’t ignore both the law and self-evident facts. Therein lies the error in my reasoning. [...] The main feature of the Putin regime, though, is its deceitfulness—from the very top, all the way down. Corruption, stealing from the treasury, persecution of political opponents—all these are consequences of the deep immorality of this government, a government that is more comfortable with smears and evasions than with transparency.
Khodorkovsky closes by saying that more and more, the Russian people are standing up to the regime and that this disobedience will soon bear fruit:
For the [younger generation's] sake, we are beginning to stand taller at last. We are beginning to stand taller in the deceitful courts and on the streets of our cities. Yes, we are still afraid, but now, even more than that, we’re ashamed in the presence of our children. And we can’t be made to bend anymore.
Read Khodorkovsky’s full column here.
ExxonMobil CEO Rex Tillerson (left) and Russian Prime Minister Putin (GETTY IMAGES)
Pavel Ivlev, founder and chairman of Committee for Russian Economic Freedom, released the following statement today on the Exxon-Rosneft alliance:
Through today’s agreement with Exxon, Rosneft has finally managed to give an aura of legitimacy to its theft of assets stolen from Yukos and its shareholders, including hundreds of American investors, as well as its CEO, Mikhail Khodorkovsky, who languishes in a Russian prison for crimes he did not commit.
Perhaps more than any other company, Exxon understands the pitfalls of conducting business in Russia, and while it is willing to assume the risks, the company must also seek opportunities to advocate for the pro-business reforms needed to make Russia a safer, freer place to invest and conduct business.
As it becomes a key partner to a Kremlin-run concern, Exxon can either play a formative role in pushing for much-needed rule of law protections in Russia or it will bear responsibility for abetting the Putin regime as it launders its ill-gotten gains and seeks to expand its personal wealth at the expense of the Russian people.
A report from Deutsche Bank saying former Yukos chief Mikhail Khodorkovsky has a 50-50 chance of early release is being cited as a primary cause for Monday’s bullish market in Russia, as the benchmark MICEX index rose more than 1.5 percent.
Mikhail Khodorkovsky
Deutsche Bank’s head of research and strategy for Russia Yaroslav Lissovolik wrote in a note that the odds of Khodorkovsky being granted parole are “significantly higher than any time in the past,” according to Bloomberg News.
“Releasing Khodorkovsky would boost Russian stocks five percent to 10 percent,” he added. The chief strategist at Troika Dialog also said he puts the odds of an early release for Khodorkovsky at 50-50.
Earlier this month Russia’s Presidential Council on Human Rights urged President Dmitry Medvedev to pardon Khodorkovsky ahead of Prime Minister Vladimir Putin’s inauguration, scheduled for May 7.
Medvedev did order Prosecutor General Yuri Chaika to review the guilty verdicts against Khodorkovsky. Chaika has until April 1 to present his findings.
Roland Nash
News that President Dmitry Medvedev has ordered Russia’s top prosecutor to review the conviction of jailed former Yukos CEO Mikhail Khodorkovsky has prompted some international investors to exhibit optimism over the Russian markets, reports Bloomberg News. The Financial Times called the review a “pleasant surprise” for investors.
Traders often cite the Khodorkovsky case as an example of the failure of Russia’s legal and judicial system. Roland Nash, chief investment strategist at Verno Capital in Moscow, told Bloomberg that a decision to free Khodorkovsky “may add 10 percent to the value of Russian stocks.”
In the last six months, the Russian benchmark MICEX index has risen only three percent, while the S&P 500 has climbed 15.5 percent.
Billed as “a place where unusual individuals who are capable of influencing the fate of Russia and the world can meet,” the annual Russia Forum wrapped up in Moscow over the weekend, with participating economists calling on the Putin regime to take immediate, concrete steps to encourage investment in Russia.
At a “Russia 2018” panel, New Economic School Rector Sergei Guriev said the Russian government could send an important signal to the investment community by releasing its most famous political prisoner:
To really prove that the Russian state is interested in a better business climate, first of all, they should release Khodorkovsky and fire all of the executives that are involved in the Magnitsky case. This will prove that the Russian government is interested in improving the investment climate.
Also on the panel with Guriev was former finance minister Alexei Kudrin, who called the current political system “obsolete” and in need of much reform in order to build a new economy. Kudrin applauded the fact that political competition has grown in the last few months. “That’s a good sign” for the economy down the road, he said.
Pavel Khodorkovsky
As rigged parliamentary elections provoked an outcry across the globe, Russian citizens have risen up to demand accountability from their leaders, writes Pavel Khodorkovsky, son of jailed former Yukos CEO Mikhail Khodorkovsky, in the World Policy Journal.
The protest movement is Russian through and through, Khodorkovsky explains, not provoked by an outside source. It’s a movement that he expects will only gain momentum as the nation heads toward a spring presidential election.
Read the full article here.
