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Das Kapitol

Big business, a resurgent state, and Russia's fragile democracy

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Harvard's seventh annual US-Russian investment symposium, held in Cambridge last week, passed under the shadow of disturbing recent events in Russia. One of the symposium's scheduled speakers, Russian oil tycoon Mikhail Khodorkovsky, was unable to attend because he is sitting in a Russian prison cell. His arrest, widely viewed as politically motivated, is yet another alarm signal from Vladimir Putin's Russia.

Khodorkovsky, who stepped down as chairman of the Yukos oil company after his arrest, has been charged with tax evasion, fraud and embezzlement. It is quite likely that, like most Russian oligarchs who made their fortunes after the collapse of communism, he has been involved in some questionable dealings (though, ironically, he has been acclaimed as a pioneer in introducing Russian business to Western-style accounting and transparency). Yet a group of human rights activists, among them Elena Bonner, widow of the Soviet physicist and dissident Andrei Sakharov, has appealed to Amnesty International asking that Khodorkovsky be recognized as a political prisoner.

It is well-known that when Putin came to power, he gave the tycoons an ultimatum: He would leave them alone if they stayed out of politics. This is the "deal" Khodorkovsky broke by giving financial support to opposition parties; indeed, there had been rumors that he himself might challenge Putin for the presidency. As Senator John McCain of Arizona put it in a Nov. 4 speech, "Mikhail Khodorkovsky actually attempted to exercise basic political freedoms guaranteed, in theory, for all Russians. He has been thrown into jail as a result."

No less disturbing than the arrest itself has been the handling of Khodorkovsky's case by Russia's so-called justice system. He has been denied bail; under Russian law, he may be held in pretrial detention for up to two years. Court hearings have been closed to the public, including the media and deputies of the Russian parliament, on the grounds that information disclosed at these hearings may compromise the "secrecy of the investigation." According to the Russian news site gazeta.ru, the judge who ordered everyone but the attorneys to clear the courtroom also ominously remarked that Khodorkovsky's "accomplices" might be present.

Writing in The New Republic, Gideon Lichfield, Moscow bureau chief for The Economist, cautions that far from being a hero, Khodorkovsky has used his wealth to undermine Russia's fledging political institutions by making opposition parties beholden to big business. True enough, but in today's Russia, where civil society is still in its infancy and there are no real checks or balances in government, big business is—like it or not—the main counterweight to the power of the state.

Meanwhile, other danger signs abound. Another speaker at the Harvard symposium, billionaire financier George Soros, has also had a close, though not personal, recent encounter with the backlash against democracy in Russia. On Nov. 6, the Moscow offices of Soros's Open Society Foundation, which has contributed millions of dollars to charities and civic organizations in Russia, were raided by a group of operatives in camouflage suits, supposedly as part of a property dispute with the foundation's landlord. The authorities refused to interfere as the foundation's computers and papers were carted away. The leaders of non-governmental organizations in Russia widely believe that the raid was politically motivated.

While the symposium still focused for the most part on positive prospects for economic development in Russia, many observers believe that the business outlook right now is as bleak as the political landscape. "To any American businesses contemplating investment in or trade with Russia, I would simply say that this is not a place where the rule of law and Western codes of conduct prevail," McCain has said. "You invest at your peril." He is echoed by Bonner, who likens the current situation to the one in the 1920s: the Communist state allowed private businesses to develop and revitalize the economy, and then carried out a ruthless crackdown. "The economic revival of Russia is possible only through the growth of small and medium-sized business," she says. "However, when big business is terrorized, it psychologically affects small business as well."

Apart from McCain's scathing speech, the US reaction to Khodorkovsky's arrest, and to the rollback of Russian democracy in general, has been decidedly muted. In a transparent reference to President Bush's now-infamous 2001 comment that he has looked into Putin's eyes and gotten "a sense of the man's soul," McCain has remarked, "I hope I am wrong, but I am increasingly concerned that in Mr. Putin's soul is the continuity of 400 years of Russian oppression."

A throwback to communism in today's Russia is not likely; but today, it seems even less likely that Russia's fledgling democracy will be allowed to reach maturity.