Russia: Oligarch’s arrest triggers crisis

Mikhail Khodorkovskii, one of Russia’s richest men and head of the giant company Yukos Oil, was taken from his private jet, on 25 October, by armed state security personnel. Khordokovskii’s arrest and the charges laid against him – embezzlement, fraud and tax evasion – have triggered a legal, political and economic crisis. Billions of dollars were wiped off the Russian stock market on 26 October. On the same day, Khodorkovskii saw his personal wealth drop by 1.5 billion dollars before trading was suspended.

Khodorkovskii was arrested on charges relating to tax evasion and fraud, but the case has far wider implications for Russian society. When Putin came to power he promised to deal with the so-called ’Oligarchs’, the men who had used their influence during Yeltsin’s reign to become fabulously wealthy while the vast majority of the population was left struggling to survive below the poverty line. Putin made this pledge not out of any concern for justice or fairness in society but because the new Russian capitalist class saw the need to end the chaos and lawlessness of the Yeltsin era. Putin wanted to consolidate a more stable form of society in which capitalist economic relations would be regulated within a legal framework.

As a former career KGB Officer, Putin proved to be an ideal candidate to mobilise the state apparatus to impose a form of stability in Russia. His rule, however, involves large elements of what Marxists call ’Bonapartism’, where the President balances and maneuvers between different sections of the ruling class and the capitalist state, often using semi-dictatorial methods. In this context, the arrest of Khordorkovskii has been presented as the victory for the so-called "siloviki"(the armed forces and the political police, the FSB-KGB) over the "family" (the oligarchs and those who began as hangers-on to the Yeltsin clique).

Putin was forced to try to stabilise the situation in the country, however, after the head of the Presidential Administration, Alexander Voloshin, seen as one of the highest placed members of the "family", resigned in apparent protest at the oil magnate’s arrest. Instead of replacing him with one of the "siloviki", Putin appointed more ’neutral’ figures, undoubtedly to check the appetite of some of his political police friends.

Of course, socialists are not shedding tears over the fate of Khordokovskii or his fellow oligarchs. Khordokovskii and other criminals plundered the state assets of the former Soviet Union to enrich themselves, while plunging millions of people into poverty. This was all part of the process of capitalist restoration in the ex-USSR, which governments around the world applauded and aided.

But for some time the oligarchs have crossed the regime in the Kremlin, resulting in actions taken against them. Boris Berezovskii, another billionaire member of the oligarchy, has gone into voluntary exile in London. Vladimir Guzinsky is trying to escape extradition in Greece. Roman Abramovich has sold most of his holdings within Russia and decamped to the terraces of Chelsea FC, the British football club whose majority shares he bought earlier this year. Even Potanin, who is seen as an ally of Putin, is rumoured to be contemplating selling up. He apparently wants to buy Arsenal FC in London.

Mafia-style capitalism

The oligarchs are the most visible and most hated face of the "New Russian" phenomenon that marked the restoration of capitalism in Russia over the last fifteen years. They schemed and stole state property and the huge natural resources that under the Soviet (i.e. Stalinist) system at least formally belonged to the Soviet people. Competitors were swept aside and repression was used against workers who attempted to resist the great sell-off. The new capitalists often employed mafia-style coercion, beatings and murders. For a decade, these people turned Russia into something like 1930’s Chicago, as they fought for ownership and control of Russia’s huge wealth.

Mikhail Khordokovskii is no exception to this. At the end of the eighties he was a Komsomol leader who used his position to accumulate starting-capital. He then establishing one of the earliest of the Russian ’pyramid schemes’, by which the new rich fraudulently conned many people into risking their earnings and savings in funds that promised high returns. The returns, of course, never materialised. Khordokovskii was then in an ideal position to benefit from the notorious "loans for shares" privatisation pushed by the World Bank. This saw the most productive industries speedily privatised. They were sold at ’dumping prices’, sometimes ten times below their real value. Khordovskii became the owner of the Yukos oil company, now the fourth largest in the world, and he has made a personal fortune approaching $8 billion.

Therefore the complaints by the Western media and governments that Kordokovskii’s arrest shows that the ’rule of law’ has not yet been established in Russia are completely hypocritical. The oligarchs have been responsible for huge crimes over the past fifteen years. Under any semblance of natural justice every one of them should have been put on trial and imprisoned long ago. The hypocritical complaints of the Western leaders over Khordokovskii’s arrest demonstrate the class nature of law in a capitalist society. According to their logic, crimes carried in the service of restoring capitalism are to be amnestied.

The fact that Khordokovskii is singled out for attack is part of a widespread attack on democratic rights within Russia in the run-up to December’s parliamentary elections and next year’s Presidential race. The parliamentary elections are rigorously controlled by what is called "managed democracy". No significant independent TV station exists since the NTV TV Channel was taken out of Berezovskii’s control last year. The laws regulating media coverage have been rewritten so that, in effect, journalists cannot criticise individual candidates. The rights of organisations and individuals to nominate or be nominated as candidates for elections have been severely restricted. For example, only parties with members in over half of the regions of Russia can participate. That means regional parties or Islamic parties are excluded. Under the new rules independent candidates are practically unable to stand. Even the Opinion Survey Organisation management was forced out to ensure that in the election period the "correct" forecasts are published, thereby helping the governing parties chances. These measures were taken so that Putin can secure a clear majority in the Duma (parliament), and to stop attempts to block his neo-liberal reforms over the next five years.

And this is where the real reason for the attacks on Khordokovskii becomes clear. Not only has Yukos Oil struck out independently from the Kremlin by trying to negotiate a merger with US oil giant Exxon, the Russian company has also tried to buy votes in the Duma. Such is the influence of Yukos, the main Duma parties complain they cannot get a majority vote for any legislation if they haven’t already discussed it with Khordokovskii.

Yukos is also pay-rolling the election campaign of the two pro-Western, neo-liberal parties – The Union of Right Forces and Yabloko – and they are rumoured to have made a $5 million "strategic alliance" with the Communist Party (CP). The former PR manager of Yukos is now working for the CP, trying to give it a more youthful image for the elections. Representatives of the oil industry are also found in the CP’s electoral list top ten. A new parliament stacked with pro-Khordokovskii supporters could wield enough votes in the next Duma to block Putin’s planned legislation, for example, on pensions and housing reform.

Putin’s regime hopes the arrest of Khordokovskii’s will stop his growing power in the Duma and the country. However the billionaire is not about to lie down. On Monday 3 November, Khordokovskii announced his resignation a head of Yukos Oil, and defiantly vowed to continue a public fight against his imprisonment. Khordokovskii also warned he may conduct a political campaign: "to build an open and truly democratic society in Russia."

Whatever the outcome of this nasty dispute between sections of the ruling elite, Khordokovskii’s arrest has demonstrated that the apparent stability in Russian society is only surface deep, maintained in place by an increasingly undemocratic regime. The Russian working class will find no allies amongst the contending wings of the ruling class. Only a strong independent workers’ movement, armed with a socialist programme, can show a way out of capitalist misery for the mass of people. One of its key demands must be the nationalization of major industries and resources, under democratic workers’ control and management.

Should Putin decide to directly confront the working class he may well provoke a profound reaction from working people – a movement that could become the most powerful force in society, dwarfing the crisis around the President’s quarrel with Khordokovskii.

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November 2003