- The Washington Times - Sunday, November 9, 2003

Russian President Vladimir Putin surely measured his move against oil baron Mikhail Khodorkovsky. Among Russia watchers, there is little doubt that the arrest of Russia’s richest man involved Mr. Putin’s personal calculations, though it was officially carried out by the general prosecutor, and wasn’t motivated by lofty regard for the rule of law.

Mr. Khodorkovsky, the former head of Russia’s largest oil company, Yukos Oil, has been charged on seven counts of fraud and tax evasion. But the real impetus for his arrest appears to be his patronage of political parties that rival Mr. Putin — thereby violating an unwritten deal with the Kremlin.

Mr. Khodorkovsky’s arrest set off protests around the world and roiled Russian markets. Washington’s response was muted — calling on Moscow to dispel the appearance the arrest was politically motivated. Initial predictions that the affair could undermine Russia economically now appear overblown. Still, Mr. Putin’s stature has been dented. His actions also put a strain on President Bush, given his close partnership with Mr. Putin.

In the contest between Mr. Putin and Mr. Khodorkovsky, the Russian president is the victor — of round one. Should Mr. Putin decide to wage more battles against Russia’s monied oligarchs, the outcome may be different for Mr. Putin and the Russia economy.

Russian financial markets have taken a hit from the Khodorkovsky factor, but haven’t plummeted. Most analysts expect markets to recover. Russia’s benchmark 2030 Eurobond is down 4.5 percent from a four-month high in early October, and figures from the Russian central bank indicate there was no significant flight of capital in the week after the arrest. In fact, reserves rose last week.

A Nov. 3 research report by Banc of America states that the Khodorkovsky affair does not “signal that Western oil companies will reduce investment activity in key projects, or stop their negotiations to pursue equity investments or joint ventures.”

Some serious observers don’t believe Mr. Khodorkovsky’s political contributions have been driven by a philanthropic desire to create political pluralism in Russia, as they are widely described in the West. The most blatant example of his questionable political patronage was his support of Yukos shareholder Vasily Shakhnovsky in his bid for parliament — 10 days after he was charged with tax evasion.

In the West, Mr. Putin’s actions are regarded as arbitrary, self-serving and unduly harsh. Mr. Putin would have appeared more evenhanded had Russian prosecutors pursued Mr. Khodorkovsky on violations of electoral laws, rather than the regularly violated tax laws. And Mr. Khodorkovsky’s imprisonment while awaiting trial looks unduly harsh. Although Mr. Putin appears to have emerged from this round relatively unscathed, it is unclear how much more prosecutorial zeal Russia can take.

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