“I Should Have Left Business 3 Years Ago” [Propaganda on Yukos

Created: 10.09.2004 16:37 MSK (GMT +3), Updated: 16:37 MSK, 19 hours 26 minutes ago
Jailed oil tycoon

Mikhail Khodorkovsky answers questions from readers of www.khodorkovsky.ru. In July-August of this year the Web-site invited questions to the jailed oil tycoon Mikhail Khodorkovsky from its readers. Over the past two months the site received hundreds of letters. A list of questions was forwarded to the entrepreneur through his defense team.

1) How is it possible to amass such an enormous fortune — $15 billion — in such a short period of time without breaking any laws?
Antonina Naumova

My stake in Yukos accounts for over 90 per cent of my fortune. Before the 1995 privatization the market value did not exceed half a billion dollars. Some may consider such a valuation as being low, but that is true, because not only the company’s potential but also the current state of affairs play a role in determining its market value.

As for Yukos, 9 years ago it was literally on its last legs, $3 billion in debt to external creditors, six-month wage arrears, a crisis in the technological chain and a moral crisis among the staff. Employees of extraction enterprises, having lost hope of being paid, were ready to take to the streets. Just try selling a company today whose staff is ready to go on indefinite strike and even revolt!

Over the past nine years under our management the value of Yukos has grown by 30 times. And this is what makes up my capital. In cash I received only dividends from the company. Their total sum did not exceed $1 billion over the years and was reinvested in the company.

That is why when such a high-placed lawyer as the prosecutor general of Russia Vladimir Ustinov says I could have repaid the so-called tax debt of Yukos — inflated by tax officials to the far-fetched amount of $7 billion — from my own wallet, he is simply suffering from the inefficiency of his economic aides. If and when Ustinov’s team is joined by professional economists, they, I hope, will point out that the unfortunate error to Vladimir Vasilyevich [Ustinov].

I would also like to say a few words about the so-called framework of the law. Yukos was privatized in strict compliance with the legislation effective in Russia in the mid-90s. Of course, those laws were not perfect.

But passing laws and formulating the rules of the game is a prerogative of the state. And if the state considers its previous actions inappropriate, it should direct its questions to its own high-placed officials. Venting its anger on people who have managed to squeeze their entrepreneurial energy into the framework of the law is hardly the most reasonable method for a responsible power.

2) When did you reconsider your position and what prompted you to focus on the problems of civic society and public interests instead of your personal interests in business and professional activities? What has served as the main impulse, the catalyst for those changes in your consciousness?
Aleksei Borisov

I have always had a propensity for public activities. And our business launched in the late 1980s, was not so much a machine for making money as a form of asserting our right to true freedom. We sought to prove to ourselves and to the country, that a Russian, a Soviet person has the right to break out of the limits of the stuffy life, where every hour and every minute is scheduled by [Communist] party cells. That he has the right to use his energy and talent for real economic and social achievement.

I am a permanent resident of Russia. And in Russia nothing has ever been done for money alone. Russians need a miracle. And wasn’t that a miracle — to boost the value of the company that you run 30-fold over a few years! To revive faith in well-being and justice, hope for a stable future among the employees of the company who had lost almost all hope by 1995!

But in the late 1990s I realized that our negative understanding of freedom, formed in the stifling atmosphere of the late totalitarian USSR, ’freedom from something’, was exhausted. The time had come for me to acknowledge my duty to society, to the country that had given us our education, to move to a positive understanding of freedom, as ’freedom for something’.

That is why we began forming public and charitable institutions, investing money in the infrastructure of the civic society, launching social programs, first and foremost, in the sphere of education. I am convinced the ideas of the next generations of Russian citizens, of the people who will shape the fate of Russia in some 10-15 years, is, in many respects, determined by the education system.

We adopted a new strategy of development for Yukos aimed at creating a ’social corporation’.

For that purpose a pension fund was set up for Yukos employees, where by summer 2003 we had accumulated about 10 per cent of the company’s shares (as I have heard, money and shares belonging to pensioners have been seized at the request of the Prosecutor General’s Office). I would like to note that the amounts accrued there are much higher than I received in dividends throughout the entire period of my work in Yukos.

We adopted a plan to increase wages, stipulating that an average wage in Yukos would reach $1,500 by 2009. By comparison, the average wage in Russia does not exceed $200 per month. And if Yukos survives, I am convinced that this plan will be implemented.

I have been in prison for over 10 months now. Having freed me of my worries about running business, prison has given me time to think, to ponder on my personal strategy. That is what I will say — if there is something I regret it is that I did not leave business earlier, in 2000-2001, so as to focus fully on my public activities.

After all, the interests of businesses and those of a civic society are different, at times, even conflicting. And in future I am set to focus on social projects. Many think Yukos will be taken away from me. Perhaps, this is indeed what will happen.

For my part, I am ready to give away my stake for the company to be spared from destruction, for the technological system to be preserved, and as a consequence, for Yukos to remain a stable corporation that pays high wages and taxes, contributing to the socio-economic stability of the country.

But in my imminent parting with Yukos I see an advantage. I will no longer have to be involved in protecting the company’s interests and my property, which means, my internal conflict of interests will be solved.

3) Could you please give a brief evaluation of the prospects of preserving Russia as a single, independent, relatively developed state within the next 30 years, provided economic liberalization continues and Russia joins the WTO?
Viktor Makarov

In a sense Russia is a developed state — in terms of its intellectual potential, the volume of its natural resources, as well as in terms of its unique role in world history. I could never agree with those who consider Russia a third-world country. Besides, the third-world doctrine, as such, has long become obsolete.

Liberal reforms have been consistently implemented in the Russian economy in the course of the past 13 years. Those reforms continue today, although many call Putin an enemy of liberalism. On the whole, under the incumbent president the course of de-regulating the economy, the renunciation of state dirigisme has been preserved.

I believe the main positive result of the liberal reforms is that millions of our fellow-countrymen have felt the taste of economic freedom. The liberal economy contributed to the liberation of many a talent that would have never developed in the administrative-command pseudo-socialist system.

However, many mistakes have been committed in the course of those reforms. To begin with, the authorities ignored the social price of reforms and the fact that social peace is a prerequisite for sustainable liberal development.

Today we pay for that omission with mistrust on the part of the overwhelming majority of the population in business and with the failure of liberal-oriented political forces in the 2003 elections, with the formation of a de-facto one-party bureaucratic parliament that has turned into an appendage of the presidential administration.

Another mistake is the neglect of the tremendous intellectual and technological potential accumulated in the defense sector of the former Soviet Union. Russia has had no consistent industrial policy aimed at stimulating the preservation and development of the military-industrial complex as a reservoir of creative forces for the country.

This, to a great extent, brought about a sharp increase in the raw materials share of the economy, deepening Russia’s dependence on crude oil prices on the stock exchange. Neglecting the problems in hi-tech industries resulted in a considerable part of the technical intelligentsia being disappointed in the liberals and joining the ranks of [nationalist] Rodina and the Communist Party, although in the late 80s and early 90s it formed the vanguard of the fight for dismantling the Soviet totalitarian machine.

Liberal reforms should be continued. Most importantly, monopolies should be reformed, small business developed, a competitive environment formed, which will imminently bring about social harmonization. With the period of domination by the business-oligarchy ending we should not allow a bureaucratic oligarchy to be formed.

Another priority issue is the development of industrial policy aimed at accelerated development of the hi-tech sector and support of fundamental and applied science. In the strategic outlook, Russia will not be able to rely on the ’oil needle’ forever. Neither does industrial policy rule out governmental investments, especially in what concerns infrastructure projects, which should not be shunned, as namely the state can set an example for business and prompt the latter to invest in certain branches and sectors of the economy.

Finally, the key issue concerns competent use of the intellectual potential of the nation. We must stop the brain drain and create conditions for the hey-day of our ’intellectual elite’. And that requires not only an appropriate economic infrastructure but also the institutions of civic society.

4) Do you think formation of a democratic society in Russia is possible with society’s mistrust in business being so high? What force could forestall the degradation of Russian society and its return to the Soviet-era mental state of an intimidated flock?
Vitaly Shevtsov

Democracy and the interests of business by no means coincide. The main goal of business is to make money. And quite often the lack of a democratic environment contributes to super-profits. Most international corporations have a rich experience of cooperation with dictatorial regimes across the globe; those regimes ensured a kind of stability those businesses could not even have dreamed of from democratic organs of power and civic institutions.

In Russia in the 1990s major business, unfortunately, did not become the standard bearer of democracy. And we share the blame for the decline of public institutions, too.

It is important to distinguish between such concepts as ’democracy’ and ’liberalism’. Nations rarely vote for human rights and freedoms. The 2003 elections, after all, can be called quite democratic, although the liberal forces were comprehensively defeated.

Being a liberally-minded person, I believe that a citizen of Russia, just like a citizen of any other country, deserves freedom as a set of inalienable rights. Those rights are given to us as a birthright, not in line with some position in some hierarchy. Those rights can never be taken away by anyone, democratically elected authorities included. In this sense, democracy too must have a limit which it cannot exceed.

The state and civic society have to guarantee that the freedom of press, consciousness, assembly, and movement cannot be taken away from a person for the sake of some group interests. For instance, the state guarantees the protection of employees’ rights in their disputes with employers. This is also a form of human rights protection.

I, together with my associates, am set to assist a full-fledged civic society and the state, too, as long as it fulfils its obligations as guarantor of inalienable rights and freedoms.

5) What would you, in retrospect, have changed about your life?
fridaysays@yahoo.com

I would have left business and focused on public activities some 3-4 years ago, so as to be independent from corporate interests. I would have devoted most of my time to studying world history and idealist philosophy. I would have spent more time with my family, my children. In other words, I would have relieved myself of the tyranny of property and directed my energy at my own intellectual development, thus enhancing my inner freedom. The freedom a person can only earn himself.

Be sure to read what are said by Moscow to be Khodorkovsky's last couple of answers. Do you think this "interview" is for real? Do you believe that Khodorkovsky is really running his website and giving these essay-like answers from prison? I have strong doubts and do see the old Soviet propaganda between the lines.

As I have worked in the oil industry for 25 years, I have watched the Yukos situation with interest.

Khordovsky was crooked and his problem was his hubris. He thought he was more powerful than the Kremlin and locked horns with Putin who won. He thought he was invincible and was courting US public opinion and set himself up for a fall.

I remember when he wanted to buy Aker Engineering in Norway who is a leading builder of offshore structures. He had cash to bankroll it but a Norwegian who didnt really want it, came in at the last minute. It was a set up. The west didnt want him to have it and good thing he didnt get it.

You wrote:
"Why do you add Soviet to the title? Do you equate everything from Russia as Soviet?"

I do not equate everything from Russia as Soviet. But when we see old Soviet propaganda published, it makes us suspicious. Khodorkovsky did not write or even give all of these answers from a prison cell, and they are arguments against capitalism.

Some of Khodorkovsky's words were:
"Democracy and the interests of business by no means coincide. The main goal of business is to make money. And quite often the lack of a democratic environment contributes to super-profits. Most international corporations have a rich experience of cooperation with dictatorial regimes across the globe; those regimes ensured a kind of stability those businesses could not even have dreamed of from democratic organs of power and civic institutions."
[...]
"In other words, I would have relieved myself of the tyranny of property and directed my energy at my own intellectual development..."

You wrote:
"Says a lot about him, not one thing he states is about helping the poor, phylanthropy or anything of the sort."

Some of Khodorkovsky's alleged words were:
"That is why we began forming public and charitable institutions, investing money in the infrastructure of the civic society, launching social programs, first and foremost, in the sphere of education. I am convinced the ideas of the next generations of Russian citizens, of the people who will shape the fate of Russia in some 10-15 years, is, in many respects, determined by the education system."

And is it true, as we have recently read from Russian opinion columnists, that under Putin's preference, new textbooks on the way to schools in the Russian "Federation" praise Stalin?

Some of Khodorkovsky's alleged words were:
"Before the 1995 privatization the market value did not exceed half a billion dollars"

You wrote:
"And just how did he come by half a billion dollars on a bureaocrat's salary?"

Did he, in fact, get a half billion dollars on a bureaucrat's salary? Was he a bureaucrat until buying Yukos stock, and was his alleged government job his only source of capital for making half a billion dollars? And if so, can you show me some reference (or at least a news article) as evidence for that?

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