Russia » Economics
Author`s name Michael Simpson

Will More Arrests of Oligarchs Follow?

Should oligarchs be placed to detention centers before the elections?
Nobody believed that it might occur. Oligarchs have gained such strong positions in the political and economic structures of Russia that even experienced political scientists repeated again and again that the oligarchs were our power, not Putin and Kasyanov with the ministers. The oligarchs themselves became perfectly convinced of this fact. However, it is a serious error to be mistaken about the authority in Russia.

It is difficult to predict result of the investigation initiated against the chairman of board of the Menatep International Financial Association, Platon Lebedev (the chief shareholder of the Yukos oil company) and head of the 4th security department of Yukos Alexey Pichugin. Since opening of the trades on MICEX Yukos shares dropped by 10.5%. By 10:45 a.m. today one share cost 418 rubles which is 4.78% less than the price fixed at yesterday's closing of the trades. So, this is how one signature of the prosecutor may turn the leader of the national economy into an outsider.

Analysts say that the unfavorable news will have a negative effect not only upon the dynamics of prices of the most capitalized and the most popular Russian company abroad, it will also mar the capitalization of the Russian business on the whole. However, this fact may seem insignificant at the time when politicians focus upon the power and control over resources upon which oligarchs have encroached with the strong belief that they can seize the authority.

The problem just partially concerns Yukos and its President Mikhail Khodorkovsky. The latter did wrong when he solely agreed construction of an oil pipeline with China and oil supplies on the top governmental level; to put it mildly, in this situation he made the president and the prime minister dance to his tune. Khodorkovsky helped Sibneft, the oil company held by Roman Abramovich, privatize the state-run company Slavneft and later decided to merger Yukos with the enlarged company. This is how majority of oil assets of the country fell out of the governmental control. It was an open secret that Russia's largest oil company was merged for further sale to an American company. In fact, the Yukos president wanted to enter big politics. He opened financial support to the key rivals of the president's party United Russia at the forthcoming parliamentary elections. There were suspicions that such frivolity wouldn't be unpunished.

Oligarchs actually decided they could manage the country as they wished. They established relations with Duma deputies, influential figures in the ministries, governmental departments and military structures. It seemed there was hardly a problem that the oligarchs would fail to solve. High ranking officials have been watching the strengthening of the oligarchs carefully. The oligarchs obviously have failed to learn from the example of Vladimir Gusinsky and Boris Berezovsky, the Russian oligarchs living in exile. 

Majority and probably even all largest shareholders of Russian companies obtained their shares and assets of their companies through rather shady methods. The Prosecutor's Office can find some evidence to bring almost each of them to criminal account in accordance with the legislation. For example, the Prosecutor's Office says Platon Lebedev illegally got 20% of JSC Apatit, the enterprise owned by the state, in 1994. The shares cost $283,142 million. Experts say that about $5 billion of Yukos are placed in banks (Trast, Menatep SPb) under direct control of Platon Lebedev.

The indictment brought against the head of the Yukos security department is much more serious: Alexey Pichugin is charged with killing of two people. If the indictment is proved, Yukos will have really great problems. It is hardly likely that a company will still flourish if its key figures responsible for security are charged with killings. If we take Yukos' status of Russia's largest company into consideration, we'll see that people issuing the sanction to arrest Platon Lebedev realized perfectly well what they were doing. It is highly likely that they had previously got approval of the highest authorities before issuing the sanction.

The first figures of the government have demonstrated their disapproval of the oligarchs. When President Vladimir Putin met with the oligarchs in the Kremlin, he told Yukos President Mikhail Khodorkovsky he would find out how the company got its oil assets and why it cheated the government at payment of taxes. Prime Minister Mikhail Kasyanov several times supported the state-run raw stuff monopolies and didn't allow oil companies to build private pipelines. Without this right Khodorkovsky's agreements with China on construction of a pipeline have less significance.  Russian Deputy Prime Minister, Minister of Finance Alexey Kudrin suggested at a governmental session that super profits of oil companies must be confiscated in favor of the government. In half a year, the General Office of Public Prosecutor decided to investigate details of the privatization activity of one shareholder of Russia's largest oil company.

The authorities have promised several times already that results of privatization wouldn't be revised. Indeed, there was no large-scale revision, but individual procedures were held to investigate activity of several oligarchs. The authority helped oligarchs gain control over very attractive infrastructures previously owned by the government on condition that they must pay taxes. But it is for the first time that oligarchs are so greedy for the power.

Photo: Platon Lebedev