Mr. Speaker, I rise to call attention of the House of Representatives an article in the Washington Post on July 10, 2003 entitled, ``The Big Shakedown on Russian Business.'' This article by Masha Lipman, editor of the Moscow Carnegie…
Mr. Speaker, I rise to call attention of the House of Representatives an article in the Washington Post on July 10, 2003 entitled, ``The Big Shakedown on Russian Business.'' This article by Masha Lipman, editor of the Moscow Carnegie Center's Pro et Contra Journal, exposes a pattern of arrests and investigations of prominent business executives in Russia. Calling this behavior by Russian security agencies ``shakedown justice'', Masha Lipman makes a strong case that ``this mock justice compromises the credibility of the Russian President when he pledges that Russia is a lawful state.''
One of the key factors in the development of a nascent democracy, like Russia, is the rule of law, as it underpins all aspects of the society. If Russia, or any other country for that matter, is to attract investment or create an environment conducive to business growth, it must be clear that investments and entrepreneurial activity will be protected under a system governed fairly and equitably according to the law.
The arrests and investigations described by Masha Lipman send precisely the wrong signals about Russian free-market economics, democracy, and the rule of law. Perceptions about a hostile business climate in Russia could have a chilling effect on foreign investment in Russia at a time when the country's economy is rapidly improving. I urge my colleagues to read this important article and join with me in urging the Russian government to take affirmative actions to support and uphold, and not to undermine, free market principles and democracy in Russia.
I submit the article by Masha Lipman into the Record at this point.
[From the Washington Post, July 10, 2003]
The Big Shakedown on Russian Business
(By Masha Lipman)
Moscow.--Mikhail Khodorkovsky is an oil magnate and, by
most accounts, Russia's wealthiest man. He is also having
some difficulty with law enforcement. Late last week he was
summoned to the chief prosecutor's office for interrogation
regarding the activities of some of his associates. Of
course, this kind of thing isn't unique to Russian business
executives; Westerners have seen many important people led
away in handcuffs over the years. But in the case of
Khodorkovsky's associates and other prominent business
executives here, it's not so much a matter of the rule of law
as it is of what might be called shakedown justice. This mock
justice compromises the credibility of the Russian president
when he pledges that Russia is a lawful state. It is also
detrimental to Russia's economic development. It threatens to
stultify the country's efforts to attract badly needed
foreign investment.
Several cases have been opened recently against people
associated with Khodorkovsky's big and successful oil
company, Yukos. The allegations include embezzlement, fraud
and murder. Two people are in jail, one of them being Platon
Lebedev, a billionaire and a co-holder of Yukos's controlling
stake. Yesterday the prosecutor's office was also reported to
be examining an alleged case of tax evasion by Yukos. (Also
yesterday, the U.S. Embassy in Moscow formally asked the
Russian government to explain its investigation of
Khodorkovsky, according to a senior U.S. diplomat.) Theories
abound as to what may be behind the shakedown, or nayezd, as
this action is being ' commonly referred to in the media and
among professional analysts. Nobody among them believes that
the case against Lebedev, or any of the other cases related
to Yukos, is a purely legal matter. In attacking Khodorkovsky
and his company, the prosecutor's office and the state
security agency, the FSB, appear to be acting on orders from
somebody with huge political clout.
Khodorkovsky believes that Yukos was picked as a target
because it's a world-class company and, especially after its
recent proposed merger with another Russian oil giant, a
tasty morsel attractive to a number of people in this
country. Ultimately, Khodorkovsky claims, this is a struggle
for power ``between different wings in the inner circle of
Vladimir Vladimirovich Putin.'' He offers no details to back
up this allegation, but there is no doubt that whoever is
attacking him would have to be very highly placed.
Early in his tenure as Russia's president, Putin announced
as his guiding principle the ``dictatorship of the law.'' But
at the same time, the prosecutor's office and the FSB were
used by the Kremlin to attack Putin's nemesis, media tycoon
Vladimir Gusinsky (for whose company, I should note here, I
worked for a time). The campaign against Gusinsky and his
associates lasted more than a year and included various
intimidating actions: raids by masked security agents,
searches, arrests and investigations. The cases mostly fell
apart, but the tactics worked: Gusinsky was forced to leave
Russia, and his media business was ruined. Similar methods
were used against another business tycoon, Boris Berezovsky,
who currently lives abroad. As a result, people who felt they
weren't getting their fair share of the goodies saw the
benefits of ``hiring'' law enforcers to improve their
position against a competitor, or just to extort money.
Igor Yurgens, vice president of the Russian Union of
Industrialists and Entrepreneurs, a group of business
tycoons, said in a recent interview that his organization
gets ``dozens
or hundreds'' of calls from provincial businessmen who
complain of similar--if much more small-time--shakedowns.
They tell stories of visitors calling on local businessmen
and informing them that their businesses had not been
properly registered some nine years before. The unfortunate
entrepreneur then has a choice of paying the extortionists
money or facing ``variants,'' which means, according to
Yurgens, ``the use of law enforcement bodies with the purpose
of redistributing property.'' In a similar fashion,
Khodorkovsky's attackers may hope to rectify what they
believe has been unfair distribution of the oil business or,
for that matter, of political power.
Khodorkovsky may still be able to defend himself and defeat
his attackers. He claims the president feels no hostility
toward him. Because Putin is sure to be reelected next year,
Khodorkovsky said, the current struggle is about ``who's
going to be in the second echelon of his team.'' If
Khodorkovsky's guess is right and it is indeed a faction in
the Kremlin--not the president himself--going after him, his
connections, money, reputation and skilled advisers may be
enough to repel the attack. But however this affair turns
out, it will have little if anything to do with proper
judicial procedure. The general understanding in Russia is
that in cases such as this, the ultimate decision is made not
in the courtroom but at the top level of the Kremlin.
Certainly one would think that Putin would be concerned if
indeed his top aides are using law enforcers to engage in
self-seeking pursuit of power and wealth. But there is an
even more important reason why he should worry about this
sort of thing. Putin has for some time emphasized the need to
lure foreign capital to Russia. He has not had much success.
During his grand visit to Britain recently, the Russian
president did his best to tout his country's ``favorable
conditions for investors.'' The question is: How interested
are foreign investors going to be when they see that even a
world-class business cannot feel secure in Russia or expect
to get justice in a court of law?