The months that followed my confrontation with Vladimir Putin were actually good for me and for Yukos, though my meetings with him became scarcer. In the spring of 2003, we announced that we would build a pipeline to carry oil from our Siberian fields to the fuel-thirsty industries over the border in China. We were closing in on a major takeover of the Russian oil company Sibneft and we were in negotiations with two American oil giants – ChevronTexaco and ExxonMobil – for one of them to become a partner in the new conglomerate we were about to create. The oil price, extraction rates and refining capacity were all rising and our profits rose with them. In the first nine months of the year, we netted just over $3.5 billion, compared to $2 billion for the same period in 2002, while turnover jumped from $7.95 to $12.2 billion. In April, Vladimir Putin formally congratulated Yukos on the tenth anniversary of the company’s founding, sending us a gushing message of encouragement. ‘The effective organisation of work,’ Putin wrote, ‘high professionalism and responsibility of employees allow the company not only to maintain, but to expand its position on the domestic and foreign market.’ But his praise was through gritted teeth – our workers didn’t receive any of the usual congratulatory state bonuses – and just two months later, Putin began his campaign to destroy the company.
The early months of 2003 were dominated by the build-up to the American and British invasion of Iraq, a move the Kremlin was convinced was motivated by the desire to seize Iraqi oil. The Russian ambassador to the UN opposed the planned invasion, announcing that he would veto any resolution that declared it legal. Iraq had been an ally of the Soviet Union and Putin was desperate to maintain the Kremlin’s influence there. But I looked at it in a different way. It was clear that if George Bush wanted to invade Iraq, he would do so whatever the Kremlin said. So, instead of opposing the US, I argued that Russia should take the opportunity to forge an alliance with Washington. If Russia were to support the US on Iraq – and offer to shore up America’s oil supplies with Russian oil in the event of a lengthy conflict in the Middle East – it would foster a ‘special relationship’ between the two countries, similar to the one enjoyed by the UK.
On 13 March 2003, a week before the invasion began, I gave an interview to BusinessWeek magazine, entitled ‘A Russian’s plea to back America’. In it, I said it would be foolish to let the opportunity for a long-term strategic partnership with the US slip through our fingers. ‘For economic development, Russia needs investment, Russia needs highly trained people, Russia needs markets, Russia needs technologies. When we take a look and see who would be the greatest benefit to us in all these directions, the answer is clear: America. Then there’s the matter of security, which has nothing to do with business. We’ve got a lot of regional problems and our only realistic ally is America. So if we’re going to prioritize things, then we have to say the most important relationship is with America.’ When the interviewer asked me if I had conveyed my views to President Putin, I answered, ‘He knows where I stand. It’s not a secret … I am well known in Russia for my pro-Americanism.’
I had invited world-class Western experts, including American specialists, to help improve the way Yukos was run. I had brought in US technology and know-how and had promoted the US as a vital market for Russia’s oil exports. I had founded the philanthropic foundation Open Russia, which at various times had Henry Kissinger, Jacob Rothschild, Lord David Owen and the former US ambassador, Arthur Hartman, on its board of trustees. Our negotiations with the American oil companies were a big part of our long-term business strategy to operate in the global market, as attracting American investors would be good for Yukos and for Russia. I had always kept Putin informed of our plans, with regular updates of what we were proposing. His replies were encouraging: he told us we were right to go in this direction.
My last face-to-face encounter with Vladimir Putin took place on 26 April 2003. I had asked for a private meeting, because the talks on our takeover of Sibneft and the negotiations with the American oil companies were at a delicate stage. Putin listened carefully and indicated that he was supportive of our plans. He did not mention the clash between us at our confrontation in the Kremlin the previous February. Only at the very end of the meeting did he raise a note of caution. There were parliamentary elections scheduled for the end of the year, Putin said, and he did not want Yukos to play any role in the campaign. He asked me to pledge that we would not support or finance the efforts of any opposition parties. I answered that Yukos was not involved in any political financing, but that individuals in a free parliamentary democracy must reserve the right to donate to any party of their choosing. I heard later that after I left, Putin flew into a rage and accused me of defying his commands.6 Coming after our public confrontation in February, the meeting was another blow to our relations.
In retrospect, it may seem as if I was naive to believe the reassurances I was receiving from Putin, but I also had other highly placed contacts in the Kremlin who were giving me the same encouraging signals. These were the remaining liberals in the leadership, men who had served under Yeltsin – the so-called ‘Family’ – who, I believed, still carried the torch of freedom and democracy. They included the prime minister, Mikhail Kasyanov, and the Kremlin chief of staff, Alexander Voloshin. The fact that they had stayed in high office after Putin replaced Yeltsin in 2000 indicated to me that there was still a faction in the leadership who believed in liberal values and were doing their best to resist the domination of the hardline KGB operatives of the Siloviki.
My clash with Vladimir Putin had brought to a head the battle between the liberals and the hardliners in the Kremlin and, with it, the battle for the future direction of Russia. While Kasyanov and Voloshin were defending the interests of private business and a free market, Igor Sechin and his cronies were telling the president to act against Khodorkovsky and Yukos. Putin’s decision would determine which Kremlin faction emerged victorious.
An unmistakable indication of Putin’s intentions came in June 2003, when a detachment of special forces stormed into the office of Yukos’s head of internal security, Alexei Pichugin, and ransacked his filing cabinets, impounded his safe and informed him that he was being arrested on charges of attempted murder. It was the Kremlin’s opening shot in a war that would not be long in coming, the first clear signal that the liberals had lost out to the Siloviki in the battle for the president’s ear.
Alexei Pichugin’s job was to protect Yukos’s real estate and crack down on theft within the organisation. He was a professional operator, tough but fair, and a family man with a wife and three young sons. But the Russian Prosecutor’s Office was making out that Pichugin was a ruthless killer, hiring hitmen to intimidate and eliminate business rivals. His arrest was a signal to us that Yukos was in their sights, that Putin and Sechin were intent on intimidating us into becoming another feeding trough for Putin’s cronies.
When we refused to knuckle under, the arrests continued. On 2 July 2003, the chief executive of Group Menatep, Platon Lebedev, was taken from his hospital bed, where he had been recovering from cardiovascular dystonia and chronic hepatitis, by police with guns and handcuffs and led to a waiting prison van. Lebedev was my long-time business partner and friend, involved in all our investment decisions, financial reporting and legal affairs. He was a key figure in the hierarchy of our holdings and his arrest was a dramatic escalation in the Kremlin’s assault against us. Lebedev’s arrest was a naked act of intimidation. The charge sheet that was eventually drawn up against him involved seven separate articles of the Russian penal code, ranging from ‘Grand theft of property by an organised criminal group’ to ‘Malicious non-compliance with a court ruling’ to ‘Conspiracy to evade corporate tax obligations’ and ‘Evasion of personal tax and social security obligations’. I spent the next 48 hours on the phone, trying to get an explanation of what was going on. Kasyanov told me he had spoken to Putin, who had asked him to relay the message that the arrest was ‘not political’. Voloshin rang to say he was working on Lebedev’s behalf. But the situation was serious. No one had any doubt that this was deliberate intimidation.