More importantly the Yukos affair established who the oil boom would fuel – the state. There would be no more ‘lobbying’. By 2005 the state was taking 83.8 per cent of oil companies’ profits in tax, where in 1999 it had taken just 45.1 per cent.46 By the end of the decade, mass tax avoidance from the oil companies was a thing of the past and the Kremlin was taking in over 90 per cent of their profits as taxes.47
Not only had Putin seized oil rents back from the oligarchy, the state had seized a huge share of the assets. Corporate stock controlled by the government jumped from 11 per cent in 2003 to 40 per cent in 2007.48 Berezovsky had boasted that seven oligarchs controlled over 50 per cent of Russian GDP (who in reality controlled around 15 per cent) but in 2006 it was five government officials who chaired companies that produced 33 per cent.49 They had become the oligarchs.
The losers inside the government were the free-market types and the Yeltsin-era officials such as Kasyanov and Voloshin. The winners were the ‘siloviks’, the Russian for those who command ‘sila’ or strength – military and security men. The others that came out on top were the St Petersburg team that had stuck magnetically to their boss under pressure, even the neoliberals such as Alexey Kudrin. The dramatic weakening of Kremlin liberals was clear to Khodorkovsky:
The main thing for Sechin was the abrupt weakening of the democratic wing of the President’s retinue, with a simultaneous strengthening of the role of repressive mechanisms in running the country. Thus it was that he is the one who became the main principal beneficiary of the changes that took place as a result of the ‘Yukos trial’.
The former oligarch is not the only person to argue that conservative forces inside the Kremlin wanted to take his personal wealth and return it to state hands, where they could embezzle from it with ease. Prominent conservatives admit former KGB agents in the government were pushing for nationalizations. ‘More or less, those that favoured more state control of the economy were the siloviks,’ reminisced Grigory Rapota, a former lieutenant general in Russian foreign intelligence, a minister at the time.
Yet the tycoon repeatedly said they offered him the chance to go on ‘one knee’ and keep his company, until almost the very end. His failure to do so unlocked the door for Sechin and his men. The renationalization of Northern Oil, which Khodorkovsky had criticized in the Kremlin, was thus the first of many.
The great turn sent a clear message to the oligarchs not to interfere in politics – and to foreign investors that Russia was no level playing field. The arrest warned Westerners never again to even think of major oil deals without Putin’s express blessing. They could only play as subordinate partners in the energy game.
With Khodorkovsky eliminated, the Kremlin felt it had achieved full authority over energy. It began to talk itself up as nothing less than an energy superpower, the Saudi Arabia of the north, where Russia’s resources served its geopolitical aims. This was no idle fantasy – the country had the largest natural gas reserves in the world and would overtake Saudi Arabia as the world’s largest oil producer.
Yet the show of disunity – even disloyalty in the government, unnerved Putin. Much of the government was opposed to the turn, leaving it at risk to damaging cracks. Within six months of the Khodorkovsky arrest, the entire Kasyanov cabinet was dismissed in spring 2004. The prime minister had been on holiday with Boris Nemtsov, the opposition leader Khodorkovsky had funded, and is alleged to have discussed the possibility of a move against Putin. When confronted with this rumour Kasyanov later cryptically recalled:
When Putin announced my resignation, he did not say why. But that evening I was told the same story you just mentioned [the plot with Nemtsov] by people close to the president, and I came to believe it. I remembered what happened the day before, February 23rd, when we attended a gala concert at the Kremlin. That night the President behaved strangely. During the intermission, he stood in a corner whispering with [Nikolai] Patrushev [the head of the FSB] and avoiding everybody. The next day, the 24th, Putin suddenly cancelled a cabinet meeting and told me to come alone.50
The sacking of Kasyanov was the climax of a purge. This had begun in Gazprom and at the bottom ranks. By 2003 as many as 70 per cent of officials inside the Kremlin had been appointed by Putin himself.51 This continued throughout the rest of his first presidential term. By 2008, he had personally appointed 80 per cent of the top 825 positions in the country, most of them military and intelligence roles.52
The crushing of Khodorkovsky caused this tectonic shift. It would be to blame the victim to suggest that his ambitions upset the balance within the Russian elite, resulting in victory for the forces of reaction – and thus he should never have attempted this. That, however, was the result. A good general picks battles he intends to win. Khodorkovsky’s hubristic sense of power resulted in the sidelining of pro-American free marketers. He misjudged his enemy and misunderstood the battle. It resulted in the elimination of the main alternative source of patronage for the country’s politicians.
Even now Putin still sees him as an enemy. A decade later his views have not changed. In 2010 when asked what would happen to the former CEO of Yukos he snarled: ‘A thief should sit in jail.’53 At the time of writing Khodorkovsky’s jail term is set to expire in 2014 – but this is far from certain.
The trouble for Khodorkovsky was that outside the liberal intelligentsia in the capital, because of the crimes of the 1990s – as he now claimed to painfully see from his bunk in the penal colony – the country more or less agreed with Putin. In deepest Russia he was seen as little better than a better-dressed Berezovsky. The President’s popularity, on the other hand, only climbed.
The irony of the injustice – for all those in the factory towns who smiled at the news of an oligarch getting what in their minds he deserved – is that given the scale of corruption in the Putin court, these resources that had been nationalized were going to be used for private gain in much the same way they had been when they belonged to a private company.
The man who had an army of bodyguards, and his own former KGB generals on staff, ended up behind barbed wire in a penal colony in outer Siberia, attached to a uranium mine, not far from the Chinese border, in a camp that in Soviet times few returned back to Europe from alive. There he was made to sew gloves with the inmates, lost all parole for refusing to sew ever more of them, and one night his cellmate would stab him in the face with a cobbler’s knife. There, he wrote that he had realized what had jailed him: ‘the authoritarian project, a direct consequence of “Yeltsin-1996”’, which had been his project.
This is not a ‘morality play’. Ideas about ‘redemption’ in prison are not the way to judge the consequences of Khodorkovsky’s actions on Russia, only on himself. If we take this man at face value, if we believe that he did not want to be president, but wanted to rally democratic Russia, we need to judge him as a politician. So what were the results? In less than a year of his incarceration in Siberia: his company was lost to the state and with it went the main funder for the opposition. The liberal parties he backed failed to make it back in to the Duma in the 2004 elections and defeat left them in disarray, squabbling as their money ran out. The bottom line was that the huge Yukos supporter of a pro-American Russia had disappeared. Khodorkovsky had, in the end, helped neither Nemtsov nor Yavlinsky, or even Zyuganov, but only Sechin.