Russia Now #5 in EV by Russia Beyond

Energy

Visas

The biggest Russian oil deal went from hot favourite to chill reminder of the risks and realities of joint ventures

Russian and European diplomats start down the long road to visa-free travel

PAGE 4

PAGE 3 rex/fotobank

A paid supplement from Rossiyskaya Gazeta (Moscow, Russia), which takes sole responsibility for the contents

Distributed with European Voice

Thursday, 26 MAY 2011

alamy/photas

Human Rights Commission members say they are being pressured to tone down their findings

Police blamed in Magnitsky death A high-level review concludes that security officers fabricated charges against Hermitage Capital lawyer Sergei Magnitsky. Meanwhile, legal actions against the firm continue.

In a bold and surprising move just days before, an independent commission set up by President Dmitry Medvedev said that the charges in the case of Russian lawyer Sergei Magnitsky were fabricated by Interior Ministry officials and that Interior Ministry and FSB security service officers were at least partly responsible for Magnitsky’s death in 2009. Magnitsky died after 11 months in pre-trial detention and repeated, ignored requests for medical treatment. The presidential commission’s findings are in a preliminary report that was leaked to the Russian newspaper Vedomosti and then confirmed by commission members to Russia Now. Magnitsky was working for Hermitage Capital when he uncovered what he claimed was a €160m tax refund scam set up by a group of corrupt police and tax officials.

Galina Masterova, Vladimir Ruvinsky

The metal cage used for prisoners in courtroom No. 14 at the Tverskoi regional court was empty during a recent hearing, its door wide open. Moscow spring sunshine streamed through windows whose metal bars had also been pushed aside. There was no need for locks when the court on 4 May considered the arrest of Ivan Cherkasov, a senior executive at British investment fund Hermitage Capital. Cherkasov lives in London and has no intention of returning to face charges of tax evasion he says are false. He says his arrest is a counter-attack by rogue forces in the Russian security services.

Russia Now

Sergei Magnitsky’s mother displays a photo of her son.

continued on PAGE 2

Business Feeding Russia’s appetite for top-quality beef

Philanthropy New sponsors needed

US cowboys ride the Russian range

Charities look for private money

Some of the local hands on a new farm in southern Russia have never worked with cattle before, but they are learning quickly under the eyes of real ranchers. PETER VAN DYK

Half a dozen cowboys sit around a long table in a newly built bunkhouse, waiting for lunch. They spent the morning at the usual routine – the herd of 1,500 cattle is calving and it has been a busy month – but when the food arrives it is a stark reminder they are not at home in Montana.

www.govvrn.ru

SPECIAL TO RUSSIA NOW

The American cowboys found southern Russia’s climate hospitable.

“We’re not bashful about it. We eat beef and we eat a lot of beef,” said Darrell Stevenson, the American rancher who teamed up with two Russian businessmen to set up the Stevenson-Sputnik Ranch in the Voronezh region of southern Russia. “One of the most difficult transitions for these cowboys has been the change in diet.” Lunch is soup followed by spaghetti and a meat patty. On the table in front of these men, the plates look small. The cowboys have all lost weight, but they did not sign up for a vacation. “Challenging is the best word,” Dan Conn said, halfway through a twomonth stay. continued on PAGE 4

Monthly supplement about Politics, economics, business, comment and analysis

The EU reduces its financing for Russian social programmes, making way for private foreign donors and Russians themselves. sophia izmailova russia now

Until he was 16, Sasha was a child of the streets. His father died young and his mother was an alcoholic. He went through several orphanages and stopped going to school, and became addicted to alcohol. In the spring of 2007, Sasha joined the two-year Street Children programme for homeless

The Kremlin opens doors for foreign talent Immigration rules are relaxed for highly skilled workers and managers from Europe and beyond. tim gosling

business new europe

Over the last year, the Russian government has passed legislation meant to ease immigration rules for highly skilled workers. President Dmitry Medvedev has said that Russia must modernise or die, and importing experience will help in this mission. Medvedev also hopes to help attract more foreign investment by making it easier to bring over managers and specialists. The development of hightech industries has grabbed most of the business headlines in the past few months. While Russia deserves its good reputation for educating scientists, it lags behind in offering them commercial opportunities – and therefore loses many scientists to other countries. The aim of reversing that trend lies behind the policy of attracting companies such as Nokia and Intel to Skolkovo, ‘Russia’s Silicon Valley’ just outside Moscow. The country also needs to attract experienced managers to improve efficiency, productivity and innovation. continued on PAGE 3

children and teenagers, which was launched in St Petersburg with money granted by the European Union. Sasha moved into a centre operated by the Doctors for Children charity, which won the grant and launched the programme. Doctors, psychologists and teachers began to work with the boy and Sasha was soon back in school. He became interested in art photography and entered St Petersburg State University of Cinema and Television.

comment

continued on PAGE 2

see page 6

Glints of a new world

The BRICS feel that it’s time to change the West’s virtual monopoly on global discourse.

modern Russia Every last Thursday in European Voice

30 June

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Politics and Society

26 MAY 2011 Russia now www.rbth.ru section sponsored by rossiyskaya gazeta, russia

after the money from Brussels runs out, it will be an achievement,” he said.

CONTINUED from PAGE 1

Sasha is now in his third year and living with his grandmother, with whom contact was established by the centre’s workers. The EU spent €300,000 under this programme, providing help for more than 1,600 orphans and homeless children. In the end, most of the children were enrolled in schools. Some teenagers have found jobs, and almost a hundred children have been adopted or returned to their biological parents. Denis Daniilidis, spokesman for the European Union delegation in Russia, described the Street Children programme as one of the EU’s most successful projects in Russia. Indeed, the programme is still operating, though it is now financed by the city. “If the municipal administration or any other local body takes this project over

Orphans are Russia’s problem now

Since 2002, the EU has financed over 70 projects for children and invalids in Russia.Yet the cash flow is falling by the year, according to Daniilidis. In 2002, the EU spent €9m on 39 projects in Russia; in 2003, the figures declined to €6m and 29 projects, dropping to €3m and eight projects in 2009. In 2010, no cash was provided by Brussels, though financing resumed in 2011, with €2m allocated for people at risk. There are several reasons for the shrinking financing. First, the TACIS programme came to an end in Russia in 2006. Since its inception in 1992, TACIS had been the EU’s main channel for supporting reform in the former Soviet republics. “Russia used to

EU investment in Russian civil society Year

Sum available, €

Grant awards, €

No. of projects

2002

9,000,000

7,174,228

2003

6,000,000

5,658,000

2004

7,000,000

6,715,000

2005

6,000,000

2006

5,000,000

4,930,376

2007

5,000,000

4,926,656

2008

3,000,000

2,904,656

2009

3,000,000

Total

44,000,000

42,308,423

194

be seen as a developing country, which accounted for the significant budget,” according to Daniilidis. “Now, Russians have to solve their problems themselves, which is why we are winding up our projects.” Looking ahead, the needs of charities in Russia may be overshadowed by the turmoil in north Africa in recent months: the European Commission has earmarked this region as a funding priority. In Russia, the number of social-grant seekers is growing, and competition is becoming tougher, too. This year, the EU delegation in Russia hopes to get several dozen bids, Daniilidis said. He said the funds currently allocated by the EU were not enough to have any radical impact on the situation in Russia. With this in mind, the EU delegation helps local funds find nongovernmental partners in Europe.“Today, we are focusing rather on networking; we want to help get people together, instead of just paying,” Daniilidis said.

Looking for private partners

More and more Russian non-governmental organisations are finding private sponsors in Europe. For instance, an international programme offering scholarships to gifted homeless

dmitry markov

Children’s charities seek private support as EU interest wanes

A children’s home in Pskov supported by the W.P. Schmitz Foundation of Germany.

children has been in place in the Pskov region since 2006. It is being run jointly by European and American donors, who are providing cash for 98 children to pay their way through top schools. Staff at the Pskov branch of the Russian Children’s Foundation also help care for the stipend winners. Deputy director Tatyana Bodrova, who has worked with orphans since the early 1990s, says the foundation has never received any direct help from the EU, relying instead on private sponsors from Austria, the Netherlands and Sweden. “Like any public organisation, we have an opportunity to take part in EU competitions, winning

them and getting funds or losing and remaining empty-handed. Even so, we prefer to establish direct contacts with European organisations and we have many such partners”, Bodrova said. Major foundations from most German cities already have offices in Moscow. Along with Finland, Germany is one of the main charity providers in Russia. Pskov’s children are also supported by sponsors from Moscow, St Petersburg and other Russian cities.“Though Russian businessmen – our potential sponsors – have recently been topping the Forbes list, it is much more difficult to get cash out of t h e m ”, B o d rova c o m plained.

Police blamed in Magnitsky death “When Sergei Magnitsky testified against the police officers, the same police officers put him in pre-trial detention, tortured and killed him,”William Browder, CEO of Hermitage Capital, said in a telephone interview from London. Magnitsky’s death became an international cause célèbre and Medvedev has staked much on investigating the case. “Medvedev has taken the Magnitsky case under his personal control,” said Alexei Mukhin, a prominent Russian political analyst.“If the authorities do not react to such things, then people will not vote in the elections and foreign investors will be reluctant to invest.” People involved in the commission say that there is a battle going on behind the scenes to temper the results. Kirill Kabanov, the head of

afp/east news

CONTINUED from PAGE 1

Interior Ministry spokeswoman Irina Dudukina lays out the state’s case against Sergei Magnitsky.

the non-governmental National Anti-Corruption Committee, is working on a separate part of the report. He says pressure has been relentless. “Several well-known officials have stated openly

that they don’t give a damn about our investigation,” Kabanov said.“This is wild, brutish arrogance. They aren’t puppets, they are players. And the [security service] isn’t prepared to surrender its employees,

partially because of the fact that they know a lot and could tell people. In addition, there is huge money at stake.” The final report is set to come out at the end of May or beginning of June, Kabanov said. Medvedev has made fighting corruption the centrepiece of his presidency, but critics say there have been few concrete results. Officials from the Butyrka jail, where Magnitsky was denied medical help, have been fired. There have not, however, been any arrests or direct police investigation of the officials accused of corruption.

Soured relationship

Hermitage Capital was once one of the most enthusiastic of Kremlin cheerleaders, but since its head, William Browder, was refused entry to Russia in 2005, it has been a strident critic.

Hermitage Capital has invested enormous time and money into its own investigation of the officials involved in the alleged tax fraud. A series of videos has been released detailing the firm’s investigation, most notably claiming to have uncovered lavish purchases by some of the officials in the year after the firm says the tax scam took place. The most recent video released by the firm accused a tax official who approved a tax refund of wiring millions into a Swiss bank account opened in her husb a n d ’s n a m e . I t a l s o chronicles the purchases of luxury property in Dubai and Montenegro as well as a Moscow country house the size of an airplane hangar valued at more than €14m. The official and her husband, the video reported, have a combined annual salary of only €27,000.

THE QUOTE

Irina Yasina economist, member of the presidential human rights council

In the early 2000s ... only one [Russian foundation] provided educational support for disabled children. Some five years ago, it was as if these children did not exist even for charitable organisations. And now, wheelchairs are being bought and programmes have been put in place to teach orphans the basics of their future life. In other words, recent years have seen huge changes. We are getting closer to Europe in this respect."

Swiss authorities froze the bank account of the official’s husband after a complaint from Hermitage Capital. Russia has taken no similar steps. The leaking of the report has unnerved the people involved and Kabanov and others see the hearing against Cherkasov as a counter-strike. Cherkasov himself has called it revenge. At the end of the recent hearing, the court backed the investigator in the Magnitsky case, Oleg Silchenko, and approved the arrest of the absent Cherkasov. Silchenko refused to comment afterwards, but he did throw out the phrase,“Who knows where I will be soon?”. In a country where people are not used to planning too far ahead, it is a fairly common remark. But it is a question with special resonance and poignancy in a case that is becoming more significant within Russia and has assumed international proportions.

Politics and Society

26 MAY 2011 Russia now www.rbth.ru section sponsored by rossiyskaya gazeta, russia

International Russians cheer the visa talks, but a final agreement might still be a long way away

Russia, EU in talks on lifting travel hurdles The EU wants Russia to grant its citizens the right to unrestricted internal migration as a condition of visa-free travel to the Schengen area. vladimir Soloviev kommersant

After spending much of the past year persuading the European Union to embark on a visa-waiver program with Russia, Russian President Dmitry Medvedev seems finally to have got his way. Russian and European diplomats agreed in April on a list of steps leading, eventually, to visa-free travel. Once the checklist is approved and completed, the parties expect to be ready to sign a visa-waiver agreement on travel between Russia and the Schengen area. EU negotiator Stefano Manservisi, the European Commission’s director-general of internal affairs, said he felt satisfied with the progress, because the parties had found “a lot in common”. Vladimir Voronkov, head of the Russian Foreign Ministry’s department of European co-operation, said that the checklist still needed fine-tuning “to ensure it was acceptable to both the Russian Federation and the European Union.”

lori/legion media

According to Manservisi, the list covers four areas. The first concerns passport and ID security features, detailing specifications for biometric passports and the capacity to install passport-reading scanners at the border. It also specifies the procedure for exchanging information on lost or stolen passports. The second area covers ways to fight illegal immigration, and stresses the need for a common ap-

“This is a ground-breaking document,”Voronkov said.“We have together set certain guidelines that both sides will now have to comply with. Both the EU and the Russian Federation are acting on a totally equal footing as they develop these steps and a future visa-free agreement. This is a new approach for both the EU and for Russia; it will develop joint steps with all [Schengen area] countries at once.”

proach to border protection. The third area concerns security coordination.“A visa-free regime implies freedom of movement, something criminals may take advantage of for money-laundering and drug- or weapontrafficking,” Manservisi said. Finally, the fourth area for joint action envisages implementing an anti-discrimination policy providing full access for citizens to any documents they need to travel as well as the right to free movement within the country where they live. Apparently, the intention here is to simpli-

Opinion With 140m potential new visitors at the door, Europe is wary

No end in sight to Russia’s dream of visa-free EU travel

Alexander Mineev

special to Russia now

In the Russian public’s mind, the bilateral agenda between Russia and the European Union has essentially been reduced to one item: visa-free travel. The reasons are clear. The visa problem is something the public can understand more easily than the WTO or European energy security. Second, unlike in the 1990s, many Russians are discovering the world and can afford to pay for it. Third, it is an internal political issue that has to do with national prestige. Many Russian experts, however, consider Moscow’s persistence to be mainly a populist gesture. And the mood in Brussels is not in favour of visa-free travel for Russians. This is

partly a matter of bad luck and bad timing. Russia is not an attractive tourist destination for most Europeans, so visa-free tourist travel is not a major concern for EU negotiators. The likelihood of visa-free travel for Russians was further diminished by the opening of the Schengen zone’s borders to several Balkan countries in 2009 and 2010. Fears of unwanted migrants have also been fuelled by asylum requests filed by some Russian tourists to the EU. Guy Trouveroy, the Belgian ambassador to Russia, fed such fears when, in an interview in early April, he claimed that the main reason why the EU is not interested in abolishing visas is that Europe is afraid of an influx of refugees from Russia’s problematic north Caucasus. At the Russia-EU summit in Rostov-on-Don last summer, President Dmitry Medvedev proposed a draft

Visa-free travel remains a long way off.

visa-waiver agreement.“No deadlines have been set. As in any dialogue, everything depends on both sides,” an EU spokesman said. According to Vladimir Chizhov, Russia’s ambassador to the EU, work on lifting travel restrictions is proceeding on two parallel tracks. The first is the complete abolition of visas. On this front, a meeting of senior officials who are working out a list of “common steps” was held last month in Moscow.The second track

is visa liberalisation. This has to do with assessing compliance with and improvement of the 2006 agreements on visa facilitation and readmission. Of the two, the track of visa facilitation appears to hold more promise. However, there are a host of technical problems that cannot be solved quickly. Dealing with just these could take at least three years. Russia and the EU have“common steps”,but so far, no roadmap.

Originally published in Kommersant

Kremlin looks to lure foreign talent CONTINUED from PAGE 1

reuters

While Russians are clamouring for easier access to the EU, the European electorate fears a new wave of migration.

fy Russia’s internal registration procedures, which have raised questions in the EU. The final text of the agreement is expected to be approved at an EU-Russia summit in Nizhny Novgorod on 9-10 June.“At the moment, it’s a document in progress. It will be publicly released once it is approved at the summit,” Manservisi said. Moscow and Brussels have a l r e a dy a g r e e d o n a number of requirements for visa-free travel that are unlikely to change during further negotiations. If signed, the agreement would only cover holders of biometric passports. The parties have also agreed that any visa waiver will

only apply to short visits of up to 180 days in total each year. The agreement covers travel between Russia and the Schengen area. Manservisi explained that the intention is to introduce “visa-free travel between Russia and the EU countries that are Schengen members”. But since the Schengen area also comprises countries that are not EU members, once a visa-waiver agreement is signed, nonEU Schengen member states will have to negotiate separate agreements with Russia, Manservisi said. Although the new travel arrangements have been widely acclaimed in Russia as a breakthrough, a final agreement might still be a long way away. The EU insists that Russia abolish what Brussels sees as discriminatory immigration rules. The criticism is directed not only toward the need to fill out an immigration card upon arrival in Russia, which EU countries do not require, but also the requirement to register with the immigration authorities once in the country.

A report from IBM states that while the quality of Russia’s scientific research institutions is among the best in the world, management schools rate poorly. This means that “skills are an obstacle for many Russian companies, with 59% reporting labour resources as a significant obstacle to development,” the report concluded. Foreign managers will be key then, as Lilit Gevorgyan of consultancy IHS Global Insight put it, because they “bring relevant skills, since most of the companies envisaged to be the backbone of modernisation are likely to be designed after Western prototypes specialising in cutting-edge high technologies.” The Russian government has imported immigration programmes for qualified people from countries such as the United Kingdom, Canada and Australia. The new legislation transforms a Byzantine immigration procedure into one of the easiest – for many skilled people, at least.

Employees and their families who qualify receive a three-year visa rather than enduring a yearly trek home to reapply. They also gain the additional benefit of going straight onto Russia’s flat 13% rate of income tax. Perhaps the biggest bonus for companies is that highly skilled employees – those that earn more than €47,000 a year – are now exempt

“Companies are looking for senior people with very specific skills,” said one headhunter. from the Federal Migration Service’s annual quota on foreign employees. One headhunter, Nikita Prokofiev of Odgers Berndtson, said that Russian companies are now focused on importing only the most valuable professionals while filling most of their positions locally. “The market has evolved,” he said. “Now, companies are only looking for senior people with very specific skills.”

Business

26 MAY 2011 Russia now www.rbth.ru section sponsored by rossiyskaya gazeta, russia

Montana cowboys ride the Russian range continued from page 1

Darrell Stevenson us rancher

Some of the most fertile soil in the world is in this region. ... We’re talking about organic matter in excess of 12%. That’s unheard of where I’m from. We fight rocks, these people fight mud."

Sergei Goncharov russian partner

Cattle like we have cost from $3,000 to $4,000 for cows, and for bulls, $6,000 to $8,000. At those prices, we can comfortably pay the bank and even make a profit [after selling the cattle]."

www.govvrn.ru

“Everything has been different, from the food to the culture to the facilities. The weather is the one thing that is the same,” Conn added. The weather may be the same as in Montana, but the land – about a twohour drive south of the city of Voronezh – is very different. “Some of the most fertile soil in the world is in this region. ... We’re talking about organic matter that is in excess of 12%,” Stevenson said.“That’s unheard of where I’m from. We fight rocks, these people fight mud. Where we’re sitting right now would be about 60 days more growing season than at home.” Now, the quality of the cows matches the quality of the land. Stevenson says his partners’ ambitions included importing “one of the top sets of Angus cattle in the world”, with full pedigrees going back several generations. The imported cattle cost roughly €4.9 million, and total investment in the ranch has been about € 1 3 . 3 m , w i t h a ro u n d €10.5m coming from a state-subsidised loan from Sberbank, Russia’s national savings bank. Russia consistently imports 40,000-50,000 live cattle per year, according to US statistics. The Kremlin wants to bring that figure

QUOTES

Unlike the cowboys, cattle imported from Montana soon got used to local conditions.

down, and a Food Security Doctrine signed by President Dmitry Medvedev a year ago demands Russia produce 85% of its meat domestically by 2020. Sergei Goncharov, one of the Russian partners in the joint venture, said cutting imports is so important to the government that subsidies cover one-fourth of the partners’ investments into the project. The partners believe the prices the cattle will command mean the project will make money quickly. Imported cows cost €2,000

to €3,000, and bulls can cost up to €6,000, Goncharov said, in part because they have to be flown or shipped in from Europe, Australia or the Americas. “At those prices, we can comfortably pay the bank and even make a profit [after selling the cattle].” Goncharov’s company, Sputnik, is already involved in cattle embryo transfer and in-vitro fertilisation. The company, it turned out, needed some management expertise as well. Some of the basics were missing, Stevenson said.

but it’s not bad work; it’s a good team. “When they start to give birth, we bring them in and help them if they are having a hard time, and look after them. If the calves are outdoors and get sick, we bring them in, warm them up and just generally take care of them.” The head vet, Alexander Naritsyn, admits that taking care of 1,500 cattle on the half-finished ranch would have been impossible without the imported help. After all, at the start of December there was al-

“They wanted the best of technology and resources, but what I felt that they needed was management, maybe more so than the live cattle itself,” he said. There are three fully qualified veterinarians on the ranch, but some of the farmhands have never worked with cattle before. But they are not letting that hold them back – after just a month on the job, a Russian named Leonid is calling himself a cowboy. “It’s the first time I’ve done this work,” he said. “I’ve only done it for a month,

most nothing there. Now, more than 900 calves have been born on the ranch. “A big ‘thank you’ to the Americans, who brought us their horsemanship and lasso skills,”he said.“If not for them, we’d be chasing one cow for half a day – they can get them back in 10 minutes.” Stevenson recalled that the handlers at Moscow’s Sheremetyevo Airport could have done with that kind of expertise when one shipment of cattle was flown in from Chicago. One cow got free when they were being transferred from the 747 to the truck for the drive to the ranch. The airport was closed to planes for almost an hour until the runaway was corralled into a truck. Some of the locals on the ranch may have started with little more knowledge of cattle farming than the Sheremetyevo cargo handlers, but Stevenson said they are keen to learn. However, Conn said, not all of the farmhands will have what it takes. “All of us here are generational ranchers, cattlemen, and to teach somebody who’s relatively new, who’s never been around more than a milk cow or a few pigs or sheep, is a big challenge,” he said. “The few that do work will be very good, because they’ve had to overcome great [obstacles].”

Energy Huge, complex project collapses when Rosneft refuses to co-operate with BP’s other Russian partners

Russian partners pull out of a joint project to exploit Russia’s Arctic shelf, blocking BP’s access to Russian oil deposits, at least for now. nikita dulnev

russia now

vosti ria no

A court ruling has undermined one of biggest-ever oil deals in Russia, the combined share swap and Arctic exploration project planned by state-controlled Rosneft and Britain’s BP. After a month’s extension to iron out their dispute passed, the Stockholm Arbitration Court said the deal could proceed only if the British company’s TNK-BP joint venture with a Russian consortium took part. In effect, it was clear that

the deal would not go through once the ruling was made, said Dmitry Lyutyagin, deputy head of analysis at Alor Invest. “The court’s conditions didn’t suit Rosneft since it was interested not so much in the actual project as in the share swap with BP,” he said. Over the course of the dispute Rosneft’s management harshly criticised the positions of TNK-BP’s Russian stockholders. Before he was removed as the chairman of Rosneft’s board in April, Deputy Prime Minister Igor Sechin said the actions of the Russian stockholders in TNKBP were damaging Rosneft’s interests. Facing many years of exploration before any investment could pay off, the

Migrants: how the problem is being solved on the state level and in everyday life

Russian partners in TNKBP probably never intended the joint venture to operate there, one expert suggested. For the AAR consortium, which which represented the quartet of Russian partners in TNK-BP, “it was of fundamental importance to avert a precedent of BP’s independent entry” into Russian oil-extraction projects, said Valery Nesterov, an analyst at Troika Dialog. For BP, exploration on the Arctic shelf is of strategic interest, Lyutyagin said. BP specialises in shelf deposits and has extensive experience working in cold waters in the Norwegian and North seas. But it has almost no experience in shelf drilling in Russia, and

so a joint project with Rosneft would amount to a strong debut on the Russian market. However, adding TNK-BP into the project would probably have left only a small share for the British company. BP is now in an unenviable situation. However the project develops, Rosneft may take BP to court, Moscow lawyer Artur Airapetov said. “The Stockholm Arbitration Court concurred that BP had behaved unscrupulously by trying to co-operate with Rosneft while going round TNK-BP. As a result, Rosneft incurred losses, at a minimum because of the project’s being frozen and the share swap being prohibited by a court of law. Rosneft has legal grounds

reuters/vostock-photo

BP-Rosneft swap-and-drill deal dead

BP chief Robert Dudley feels the sting of defeat.

to demand compensation,” he said. The Kremlin was quick to scotch suggestions that the partners had counted on state intervention to help push the deal through. In

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an interview with Russia Now, presidential aide Arkady Dvorkovich said the affair was very much a corporate dispute that would have to be resolved by strictly legal means.

Economy and Finance

26 MAY 2011 Russia now www.rbth.ru section sponsored by rossiyskaya gazeta, russia

Trade No more preferential treatment: Russia is considered well-off

Banking Public-private power play

EU to Russia: Time to trade on equal terms

VTB Group moves to take control of Bank of Moscow Takeover leaves some analysts worried about the state’s growing stake in the banking sector. The Kremlin says not to worry. Dmitry Dovlatov

ben aris

business new europe

Russia is no longer an emerging market. That is according to the European Union, which wants to get rid of the preferential trade terms implemented in the 1990s to support Russia’s transformation into a freemarket economy. The proposal is the most concrete example yet that the world economic order is changing as the leading emerging markets begin to mature. The European Commission has announced plans to exclude middle-income countries such as Russia and Brazil from special rates according to the EU’s General System of Preferences (GSP). The decision to cut benefits is viewed as the most significant revamp of the trade system since the preferential scheme was first introduced in 1971. “Global economic balances have shifted tremendously,” Karel De Gucht, the European commissioner for trade, told reporters.“If we grant tariff preferences in this competitive environment, those countries most in need must reap the most benefits.” Currently, 176 countries that together account for 4% of EU imports are entitled to the special tariffs. Under the proposals, the EU will take about 80

countries off the list. “Trade preferences do not make much sense anymore for relatively well-off countries, such as Russia, Malaysia, Saudi Arabia or Qatar,” De Gucht said. But the proposal might face challenges as it goes through negotiation with 26 other commissioners; at least ten commissioners have already expressed their opposition to the proposal, which must be approved by the European Council and European Parliament. Yet the proposal is in itself the most explicit acknowledgement by the EU of Russia’s rising econom-

with the United States (€16.6bn). A final list of countries that are to be excluded from the GSP has not been set yet and the Commission has said that it would like the new rules to be in place by 1 January 2014. The countries struck off the list will be offered the opportunity to secure alternative concessions by signing free-trade deals, EU officials said. However, while Ukraine is lobbying hard for a freetrade agreement with the EU, Russia is primarily focused on building its own free-trade economic union with Kazakhstan and Be-

Russia is primarily focused on building its own customs union with CIS countries

The EU proposal will have only a modest impact on Russia’s external trade

ic power on the European continent. The EU is by far Russia’s biggest trade partner and trade volumes have grown quickly over the past decade. EU countries accounted for 49.5% of Russia’s trade turnover in 2010, and the total volume of trade more than quadrupled between 2000 and 2010, from €46.8 billion to €216bn, according to the Russian Federal Custom Service. Russia’s trade turnover with the Commonwealth of Independent States (CIS) was 14.6% of the total in 2010 (€64.3bn); 19% was with Asia (€81.8bn); 9.5% with China (€41.8bn); and just 3.8%

larus under the auspices of the Customs Union that came into force this year. The Kremlin is showing renewed interest in joining the World Trade Organization and hopes to accede to this global trade club by the end of this year. Under the new EU scheme proposed by De Gucht, countries“not classified by the World Bank as highincome or upper-middle income countries during three consecutive years” can enjoy the GSP benefits. Russia’s per-capita income has increased nearly tenfold over the past decade, to €11,200 at the end of

2010, according to the “CIA Factbook”, making Russia a “developed middle-income country” according to the most recent United Nations Human Development Index report. Western European companies have responded to the spike in disposable income by flocking to Russia to capitalise on its fast-growi n g a n d i n c re a s i n g ly wealthy consumer market. Russia’s TV ad spending is expected to become the biggest in Europe and in the top ten globally as soon as 2013, according to media experts. Likewise, Russia is on course to become the largest car market in Europe within five years. German-Russian trade turnover increased by just under one-third in 2010, to €36.5bn – about as much as Russia’s entire foreign trade turnover a decade and half ago. Even if the EU proposal is implemented, it will have only a modest impact on Russia’s external trade. Russia’s exports are largely driven by natural resources, including oil, which rose 22% in the first quarter of this year, to €80bn; this was due to higher-than-expected oil prices and unrest in the Middle East and northern Africa. However, as the economy has started to recover, the value of Russia’s imports, mostly manufactured products and retail goods, soared to €42.5bn, twice as high as a year earlier.

Bank of Moscow was set up in the mid-1990s as, in effect, the pocket bank of Moscow’s city government. And so, when President Dmitry Medvedev dismissed Yuri Luzhkov as the capital’s mayor in September, the bank’s future looked uncertain. The Kremlin made a move in November, when Finance Minister Alexei Kudrin announced that state-backed VTB Group was interested in buying the bank. With Bank of Moscow’s 500-plus branches, VTB would rank second behind its sister, Sberbank, which has the lion’s share of Russia’s retail banking business. The deal did not, however, progress smoothly. Bank of Moscow’s managers initially said they was willing to sell their 20.3% interest to VTB. But things turned ugly in March when they brought a legal case to block VTB’s purchase of a small stake in the bank from Goldman Sachs. Bank of Moscow's president, Andrei Borodin, then found himself implicated in a corruption probe into loans made to a property company controlled byYelena Baturina, Luzhkov’s wife.When he was called in for questioning in April, he fled to London and a week later agreed to sell his stake at what analysts report was a below-market price. The VTB takeover significantly increases the state’s share of the banking sector and follows closely on Sberbank’s takeover of Russia’s leading investment bank, Troika Dialog, in February. Both VTB and Sberbank have become noticeably more aggressive in building up their business since the 2008 financial crisis. Several foreign banks have already left Russia because of the growing competition; the latest was HSBC, which said on 26 April that it was abandoning its two-year drive to build up a retail operation in Russia.

“On the one hand, the state is making it more difficult for private banks to operate,”said Roland Nash, chief strategist with Verno Capital. “But on the other, we are starting to see the beginning of badly needed consolidation in the banking sector. Taking over banks that are clearly not run on commercial lines but for the benefit of their owners is, all said and done, a good thing.” According to Oleg Vyugin, CEO of the private MDM Bank and former head of the Federal Financial Markets Service, state banks are preventing the growth of private banks, as their quasiautonomous status significantly lowers their borrowing costs. The Kremlin has said that the increase in the state’s share of the banking sector is temporary. The plan is to sell the state’s shares inVTB and Sberbank and increase competition in the sector, presidential economics adviser Arkady Dvorkovich has said. And the state has been busy selling shares in both banks. VTB Group raised some €6bn in May 2007 by selling a 22.5% stake, and the bank sold another 10% in February, for just over €2bn. The state has said it wants to sell another 10% as soon as possible, and plans to sell 7.6% of its controlling stake in Sberbank to the public, probably later this year.

THE QUOTE

Mikhail Alekseev chairman, Unicredit Bank russia

Today we can see [in Russia] a trend toward concentration of the banking business focusing on several large state banks. To be honest, this is not always based on open and transparent procedures."

I disagree that state banks have nipped competition in the bud. Competing is never easy, and not just [against] state banks."

vedomosti, 3 may 2011

fotoimedia

SOURCE: Russian investment bank Renaissance Capital, RUssian Federal custom service.

Special to russia now

Russian trade with the EU is booming as consumer spending rises. Business with Germany alone is about as much as total foreign trade 15 years ago.

Bank of Moscow has been swallowed by the state-backed VTB bank, Russia’s second largest.

Comment

26 MAY 2011 Russia now www.rbth.ru section sponsored by rossiyskaya gazeta, russia

AFGHANISTAN: Caught between two alliances

niyaz karim

Alexei Fenenko

Kommersant

ecent events in the Middle East have pushed reports from central Asia and Afghanistan into the background, but new conflicts between Russia and NATO are emerging in this region. After a year of negotiations between the United States and Kyrgyzstan over the opening of two new training centres, Kyrgyz Prime Minister Almazbek Atambayev announced in late April that the openings had been postponed and that Russia might also be involved in setting up the centres. Atambayev also said that the NATO

transit centre at Manas airport would eventually be turned into a civilian transit hub. British and American media have presented these events as a fresh attempt by Moscow to push the Americans out of central Asia. The situation is interesting because, at the NATO-Russia Council meeting in Berlin in April, the sides agreed to improve their co-operation on Afghanistan.The participants endorsed an updated version of their common action plan on terrorism. They also agreed to set up a fund to facilitate the training of ground personnel for Russian-produced helicopters in Afghanistan. The latest events in Kyrgyzstan,

Recent events in central Asia show the strategic gap betweeen NATO and Russia. however, show that the two sides continue to have different strategic interests. There is, though, a more serious problem behind these tensions. At its summit in Lisbon in November, NATO adopted a new strategy for Afghanistan. Its main components were stated as: first, expanding the participation of NATO partners (from Armenia and Georgia to Australia); promoting the abil-

ity of the Afghan armed forces to conduct military operations; developing a political dialogue between Hamid Karzai’s government and the opposition; and altering the format of the NATO peacekeeping mission in Afghanistan, starting in 2014. More specifically, the International Security Assistance Force is to be withdrawn, while NATO auxiliary military units are to remain in Afghanistan. The Afghan government will be in charge of ensuring stability in the region. For Russia, this scenario does not promise to be very positive. Within the framework of the Collective Security Treaty Organisation (CSTO), Russia provided extensive se-

curity guarantees to central Asian countries, and now Moscow is concerned that implementing NATO’s Lisbon strategy will lead to a new regional war. The involvement of CSTO in matters concerning Afghanistan has increased over the past eight years. The CIS Antiterrorist Centre has been included in the CSTO structure; each year CSTO member states conduct operations to stop drug smuggling from Afghanistan; and the CSTO has decided to deploy rapidresponse forces ready to act in crises. On 20 January, Russia and Afghanistan signed an agreement on trade and economic co-operation, which envisages Russia supplying Afghanistan with military equipment. But there has been no dialogue between the CSTO and NATO on Afghanistan. The CSTO’s leaders adopted a plan for co-operation with NATO on Afghanistan in 2004. Similar proposals were made by Russia in 2006 and in 2009, and by CSTO Secretary-General Nikolai Bordyuzha in 2010. Two key areas of possible RussianNATO co-operation were identified: combating the transnational terrorism network (through, inter alia, collaboration between intelligence agencies), and the fight against drug-trafficking.Yet, NATO and CSTO still do not officially recognise one another. NATO prefers to negotiate separately with Russia and the central Asian countries. There are three scenarios taking shape for Afghanistan’s future, none of which looks good for Russia. The first is that NATO troops withdraw rapidly. The consequences would presumably be the return of the Tal-

iban, the fall of the Kabul government and the escalation of military operations against Pakistan, all the way up to the Taliban breaking through to Pakistani nuclear sites. Tajikistan and Uzbekistan would be forced to protect the Tajik and Uzbek clans of Afghanistan or block attempts by the Taliban to support rebel Islamists on their territory. Under the second scenario, the status quo would persist indefinitely.The result would be an expansion in drug-trafficking.The CSTO would be forced to step up its own actions near the Afghan-Tajik and Afghan-Uzbek borders. The independent actions of the CSTO in Afghanistan would increase tension in the organisation’s relations with NATO. In the third scenario, NATO would intensify military actions in the next three years with the goal of ‘finishing off’ the Taliban. NATO would try to establish a dialogue with individual central Asian countries, particularly Uzbekistan. Given the lack of co-ordination with CSTO, Moscow could perceive NATO’s steps as an attempt to cause a split in the organisation. Russian experts increasingly feel that NATO’s policies in Afghanistan are intentionally unfriendly towards Russia.The withdrawal of NATO troops from Afghan territory could lead to a new regional war. In such a situation, Moscow would be faced with the difficult choice of either getting drawn into a war or failing to observe its commitments as part of CSTO. Alexei Fenenko is a security expert at the Russian Academy of Sciences.

gliNTs of a new world order Fyodor Lukyanov Special To Russia now

he West’s response to every BRICS summit barely varies. The first reaction to these gatherings – the most recent took place in April – is to dismiss the group comprising Brazil, Russia, India, China and now South Africa as an artificial organisation with no future, because its member countries have practically nothing in common.The second, contradictory, reaction is anxiety, because the policies of its members are in opposition to those of the United States. What has particularly raised eyebrows among Western commentators in the wake of the world financial crisis is Russia’s presence in BRICS: what can a commodity-oriented state with uncertain prospects for modernisation contribute to a group of “future leaders”? Indeed, Russia is a bit of an odd man out: its rate of

growth is far below that of China and India. More important, Russia faces problems that are totally different from those in other BRICS countries. In spite of the others’impressive growth rates, they remain developing countries; Russia is a developed country that has

The BRICS feel that it’s time to change the West’s virtual monopoly on global discourse. lived through an unprecedented period of decline and is now trying to bounce back. The challenges the BRICS members face are therefore similar in some ways and different in others. Any arguments against Russian membership would be more legitimate if the discussion were exclusively about economics. But, obviously, the member coun-

tries see the BRICS structure above all in political terms. This reflects the objective need for a more diverse and less Western-oriented world order. The institutions that have been functioning since the Cold War are unable to provide answers to the multiplying problems of the 21st century. New arrangements have not taken shape, and the countries that are unhappy about the situation are not trying so much to find a replacement for obsolete arrangements as to find ways around them. A multipolar world needs formats other than those that catered to a bipolar one. It is no accident that BRICS declarations occasionally question the legitimacy of the existing system. Do not keep your fingers crossed, however, for any reform of the UN Security Council; the current permanent members, BRICS states Russia and China included, are not going to share their privileges with anyone.

All five BRICS countries feel that the West has virtually monopolised global discourse. This is not only at odds with the economic and even political alignment of forces, but also prevents decisions from being made. All five are aware that their attempts to increase their international weight exclusively within the existing structures are doomed.These countries are seeking to bolster their negotiating position at a time when a future world-system is being created. The fact that they represent parts of the world that are becoming more and more significant lends more weight to their aspirations. For Russia, which has been searching for a foreign-policy identity since 1991, the BRICS idea has come in very handy. It would be hard to find another format that would encourage a nonWestern orientation in foreign policy, remind the world of Russia’s global ambitions, and stress the country’s similarity to states that

niyaz karim

are world leaders in terms of economic growth. An additional benefit is the group’s principle of non-confrontation: all the BRICS states strongly deny that their group is directed against anyone. But whatever the talk – and even the thinking – in the BRICS capitals, it stands to reason that increasing the influence of one group of countries can only happen if Western influence diminishes. Certainly, that is not necessarily bad if it happens in an evolutionary way. The objective reality is that the

world needs a new balance, and this calls for support for the emergence of new centres of power. If one group seeks to retain its privileges and other groups quietly work to erode them, the world will undoubtedly experience a new upheaval. The world order that would emerge from it would depend on the outcome of that upheaval.The criteria would be clearer, but the price would be dear. Fyodor Lukyanov is chief editor of the magazine Russia in Global Affairs.

Opinion

26 MAY 2011 Russia now www.rbth.ru section sponsored by rossiyskaya gazeta, russia

MINSK TAKES A body blow to the wallet Konstantin Eggert

Kommersant fm

he Russian finance m i n i s t e r, A l e x e i Kudrin, has refused to extend a loan to Russia’s ally, Belarus, which is suffering a severe financial crisis. The minister has advised Alyaksandr Lukashenka to ask the Eurasian Economic Community or the International Monetary Fund (IMF) for assistance, and to begin a large-scale privatisation of public property. This means that Moscow intends to propose that the Belarusian president capitulate, and not on very honourable terms at that. This may well be the most serious crisis to date for Belarus’s perpetual president. Moscow has explained to Lukashenka, through Kudrin, that assurances of eternal friendship no longer suffice. Russia is in no hurry to rescue the beleaguered Belarusian dictator with cheap cash in hand. Meanwhile, Lukashenka’s positions have become much less solid following the rigged December election, harsh suppression of the opposition, the terrorist attack in the metro, and the devaluation of the Belarusian rouble. The economic situation is a particularly painful subject, since it concerns all citizens rather than just supporters of a scarce and

niyaz karim

This may well be the most serious crisis Belarus’s perpetual president has ever faced. fragmented opposition. And the blatant mockery of an election that Lukashenka has managed to get away with even in the eyes of the ever-obedient Belarusians might just start to look a little bit different in

light of the slumping rouble and price rises. The European Parliament’s president, Jerzy Buzek, added insult to injury by calling on the International Ice Hockey Federation to transfer its 2014 world championship from Belarus to another country. Political regimes like that in Belarus tend to attach great importance to such prestigious sporting events, as they are one of the few ways for them to acquire international legitimacy, even if for only a few days.

And here come the Russian allies with a coup de grace, refusing to provide cash. Even though they used to provide it – at first eagerly, then less so, and most recently with a gnashing of teeth. But they used to give it anyway. Now Kudrin is sending a starkly unequivocal message to Minsk: either go cap in hand to the IMF or sell whatever is left of the Belarusian economy to Russian investors on the cheap. Moscow has no fear that Lukashenka might break free from Russia’s

embrace and into that of the European Union: after December’s election debacle, Brussels would require complete political capitulation by Lukashenka. The IMF, much less interested in the issues of democracy, would demand painful reforms; these would be certain to backfire against the president’s policies, which are based in essence on procuring a guaranteed minimum income for a majority of Belarusians. Under the circumstances, sale of Belarusian assets to the Kremlin’s proxy businessmen seems like the lesser of two evils. Yet, there is a problem for Lukashenka even here, for he is the one who controls almost the entire economy. If control passes to Moscow, Lukashenka would be reduced to a nominal head of state. If so desired, he could then be replaced without much ado by some obscure bureaucrat who, unlike the current leader, did not beat up protesters or put opposition politicians in jail, but simply carried out orders. That would fit Russia’s bill. Which casts Kudrin in the uncharacteristic role of a virtual special envoy, one who has delivered Moscow’s ultimatum from a distance. I would very much like to have been present at the negotiations between Lukashenka and Vladimir Putin when the Russian prime minister visited Minsk on 19 May. The Belarusian dictator most likely was required to give his answer there and then. Konstantin Eggert is a former editor for the BBC Russian Service.

new rules for the global energy game Danila Bochkarev

Expert

he Fukushima disaster has prompted Japan and several European countries to re-examine their energy strategies, with the probable consequence that the global ‘nuclear renaissance’ will be dealt a fatal blow. The decrease in nuclear energy output will be partially compensated by new and unconventional sources. However, it will also increase demand for ‘traditional’ hydrocarbon resources, destabilise energy markets and increase tensions between energy buyers and sellers. This is the setting for the European Union’s effort to put together a coherent energy policy in order to protect the interests of consumers and forge a dialogue with the world’s key energy players. At the same time, the EU is going ahead with its scheme

to liberalise energy markets. Though the benefits of liberalisation are obvious, its constraints are also not negligible.The policy will break up European energy companies and put them in a weaker negotiating position when up against the energy supply giants.This is already becoming clear in central Asia, where EU companies have been lagging behind their Chinese counterparts in securing energy deals and protecting previous agreements. Until now, the EU’s external energy policy has been almost exclusively focused on building ties with the major energy-producing nations, but little has been done in regard to promoting a coherent and universally acceptable model of energy governance. The undoubted success story of EU external energy relations is the Energy Community, an initiative to harmonise en-

ergy regulations among its member states in southeastern Europe. However, one can hardly imagine the Energy Community and EU ‘rules of the game’ being extended to the key producing countries, at least not in the near future. Uncertainty about the world’s future energy mix, unstable commodity and energy prices, the lack of workable and broadly accepted schemes for co-operation, and a growing perception of geopolitical competition for resources all reveal the emergence of deep political discord with the potential to affect global stability and sustainable economic growth. The EU and its major energy suppliers must work toward a universal and concrete proposal for how to tackle this discord. In order to address these challenges, global leaders should begin work on a new concept for comprehensive

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energy security based on trust in the global energy system, including energy markets and regulatory mechanisms. This can happen only by assembling an efficient and powerful constellation of multilateral energy co-operation frameworks. In a nutshell, we need new rules for a new energy game. This cannot be achieved by creating a new global energy organisation. Past experience of negotiating energy treaties tells us that any new multilateral negotiations risk becoming extremely complicated and unproduc-

tive. It appears more promising to reform existing institutions to better manage the global dialogue on energy security – namely, the International Energy Agency, International Energy Forum and the Energy Charter Treaty, provided their agendas and mandates can be better aligned than at present. I strongly believe that this project of multilateral energy governance can be a shared undertaking of Brussels and Moscow. Danila Bochkarev is a Brussels-based fellow with the EastWest Institute.

bp aims at long stay in russia Dmitry Simakov

Vedomosti

P took yet another slap in the face in Russia when its partner in the TNK-BP oil company, AAR, blocked BP’s deal with Rosneft. A last-ditch attempt to rescue the deal by buying out the rebellious partner has failed. This is not the first time BP has run into trouble in Russia, going back to its purchase of a 10% stake in oligarch Vladimir Potanin’s Sidanco in 1997. When he was BP vice-president, John Browne had hoped that Potanin and Sidanco would provide political cover. This was a mistake, Browne writes in his recent memoir“Beyond Business”:“We were a naïve foreign investor caught out by a rigged legal system.” Sidanco quickly began to lose its best assets to AAR’s Tyumen Oil. In the end, BP chose to ally with Alfa Group’s Mikhail Fridman and his AAR partners and together they created a new oil major, TNKBP, in 2003. Alas, the romance was short-lived. In 2008, AAR squeezed most of BP’s representatives out of the joint venture, not even sparing CEO Robert Dudley, who is currently chairing BP. Thus, the score in the BP vs AAR match currently stands at 0:3. However, AAR’s wins are tactical, while BP is sticking fast to the goal it outlined back in 1997: to get a strong foothold in Russia. “Lots of people said to me [in 1999]: ‘The wise thing, John, is to cut your losses and get out.’ But I knew if we allowed ourselves to get pushed out of Russia we would probably never go back,” Browne writes. In the late 1990s, all BP wanted was to retain its Russian foothold, but now the company is thinking of expansion.TNK-BP now accounts for a quarter of BP’s production and a third of its reserves. But the company cannot grow further, and it is for this reason that BP has long been looking for a new partner from among state-owned companies.The last two conflicts around TNK-BP were due to AAR’s desire to keep BP. As we know from WikiLeaks, the 2008 scandal followed talks about a BP alliance with Gazprom.This time, it’s Rosneft. Given BP’s considerable flexibility, the company is certain to get what it wants, sooner or later. BP has already received €10 billion in dividends from TNKBP. More will follow thanks to AAR’s victory. Originally published in Vedomosti

Culture

26 MAY 2011 RUSSIA NOW WWW.RBTH.RU SECTION SPONSORED BY ROSSIYSKAYA GAZETA, RUSSIA

Arts Directors and writers have turned to Mikhail Khodorkovsky as a subject, inspiration and colleague.

From oil tycoon to imprisoned muse

ITAR-TASS

A new documentary traces Khodorkovsky’s transition from a young Communist to Russia’s richest man.

In his own writing, Khodorkovsky explores the meaning of justice, corruption and endurance in the face of hopelessness. ANNA NEMTSOVA

SPECIAL TO RUSSIA NOW

One of the most published Russian writers, Boris Akunin, once compared Khodorkovsky’s imprisonment with Andrei Sakharov’s arrest and exile in G o r k y, n o w N i z h n y Novgorod, in 1979. Nobody then believed in the possibility of positive changes in a country that

kept an academic in exile, the writer recalled. But all it took was one phone call from Mikhail Gorbachev for Sakharov to go free and for people to believe in the fresh wind of change. “Until Khodorkovsky is out of jail, all the beautiful words about civil society, independent courts and the

any play based on a real person has either to leave Russia or to die, no Russian dramatist has so far made Khodorkovsky the hero of a play. Nevertheless, his fate continues to exert a strong pull on Russia’s cultural elite. Writer and internationally recognised photographer Yuri Rost said he went to Khodorkovsky’s trial to look at a man in a glass cage display “true courage.” Tuschi , the director of “Khodorkovsky”, said he was intrigued by the story of Khodorkovsky’s defiance, the courage of a man who could have chosen political asylum, but instead returned to Russia on his private jet, knowing he would go to the gulag. The film looks at how money and prison can transform a personality. In one scene done in animation, Khodorkovsky swims across a pool full of oil and golden coins. He seems to be sinking. As he approaches the pool’s edge, there are fewer coins and the water begins to clear: Khodorkovsky starts to swim again. Anna Nemtsova is a Moscow-based correspondent for Newsweek magazine.

EXCLUSIVE INTERVIEW PAVEL KHODORKOVSKY

“Dad offended by not obliging Putin”

doesn’t crave power for power’s sake.

Mikhail Khodorkovsky’s 25-year-old son Pavel, who now lives in the US, says his father enjoys being in control but does not crave power for its own sake. NADEZHDA POMERANTSEVA RUSSIA NOW

Imagine for a moment that you are returned to 2003 by a time machine. Would you try to persuade your father to avoid the confrontation with the Kremlin? Of course, I would. But you have to understand that knowing is one thing and living through it is another. Dad certainly knew he would be arrested and would have to spend time in jail. I don’t think he expected to spend so much time there. The key reason for his decision was not to leave [business partner] Platon Lebedev behind alone.

PRIVATE ARCHIVE

During the first few moments of the movie “Khodorkovsky”, the screen remains black. Then a narrow blue band widens, revealing two oil pumps in the middle of a snowy waste in Siberia, arms swinging like a huge clock, ticking off the inevitable minutes. The film, which was a sleeper hit warmly received at last winter’s Berlin Film Festival, got much bigger play after a copy was stolen from the director’s office before a small screening, causing an even greater sensation. It has been seven years since the richest man in Russia, oil tycoon Mikhail Khodorkovsky, was arrested at Novosibirsk airport for fraud. His fate has intrigued creative minds and intellectuals all around the world. Long-term imprisonment has turned Khodorkovsky from a Russian businessman into an iconic subject. While many of Russia’s oligarchs ignored or broke poorly enforced laws to amass their riches in the 1990s, only Khodorkovsky was arrested, his advocates said, because of his growing interest in the political opposition. Fate has also transformed this one-time oligarch into a philosopher and writer; he has been accepted by Russian artists not only as a subject, but also as a col-

league. His prose, which has been published in magazines and a few opposition newspapers, explores the meaning of justice, the decay of corruption and endurance during what seem to be hopeless moments. Director Cyril Tuschi, who spent five years travelling and speaking to Russians, said he is“overwhelmed by the aura of a martyr” surrounding Khodorkovsky. The German documentary was released soon after a Moscow court sentenced Khodorkovsky and his business partner, Platon Lebedev, to six more years in jail. The trial added to the relevance of the recent proliferation of Khodorkovskythemed literature and art. In Russia, where history is saturated with stories of political repressions, exiles and arrests going back generations, many writers have personal associations and motivations for becoming involved in or staying out of politics. For acclaimed Russian novelist Lyudmila Ulitskaya, Khodorkovsky’s fate has become entwined with her own. They jointly received a literary prize for their letters to each other, which were published in the independent newspaper Novaya Gazeta. Ulitskaya’s grandfathers spent more than 20 years in jail between them; her friends from the 1960s were imprisoned as well. She approached Khodorkovsky as a subject emblematic of the throes of Russian society and an archetype of its literature.

struggle against corruption will be taken as empty,” Akunin said. Soon after 22 months of hearings and the court’s new guilty verdict, the most famous Russian prisoner had his own literary debut, a collection of his articles, interviews and dialogues. Back in the 1990s, a popular satirist and playwright, Viktor Shenderovich, associated Khodorkovsky with a long list of Russia’s richest men.“As soon as he went to jail, his real fate began to lead him,”Shenderovich said.“Today, Khodorkovsky is our barometer of change: The day he is free, the world will know that new, and better, times have come to Russia.” In Russia, the price for exploring injustice and corruption can be high, the writers say: the journalist Anna Politkovskaya, the human-rights activist Natalya Estemirova and the lawyers Stanislav Markelov and Sergei Magnitsky are becoming accepted among writers as symbols, as people who lost their lives in the struggle for truth and justice. Perhaps out of respect for Anton Chekhov’s notion that the main character of

Have you come under any pressure from the Kremlin? No, I haven’t. I’ve been lucky. When my passport expired, I got it renewed without a hitch. Does your father like power? Is he power-hungry? My father likes to manage a process and obtain an outcome. He likes to make decisions, to make adjustments and improve things. But he

Have you come across people trying to make money out of your family tragedy? Of course I have – and lots of them. That becomes pretty obvious, right from the first conversation.They offer all sorts of things, from book rights to concerts. Many people just want to use our tragedy to get some PR for themselves. ... Luckily, there are also selfless people who help – for example, Arvo Pärt dedicated a symphony to my father, and the Russian writers [Lyudmila] Ulitskaya and [Boris] Akunin have defended him publicly. Have you seen the film “Khodorkovsky”? How accurately does it capture your father’s character? I’ve seen it twice. It is a good documentary, made even better by the ‘off-site’ scenes included by the director. It presents the key facts correctly and offers an independent analysis of the events. I liked the allegories

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the director used to highlight the story at several points. One of them links the storyline together and summarises well the transformation of my father’s views and goals. The film is clearly the result of painstaking efforts. That said, it’s Dad himself who does the best job explaining the situation; his courtroom interview at the end of the film shows his strength of character and his calmness in the face of the lawlessness unleashed upon him. Do you think all this happened as a result of a personal grudge on Vladimir Putin’s part? Or merely of infighting between business and the state? Both. Dad offended by not obliging. Putin asked him not to finance the opposition, and he refused to comply. Dad did, indeed, bankroll nearly all of the opposition parties in the country back then. Why? Because he thought a strong opposition was needed.

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