Western investors should back President Putin in his battle with the
oligarchs, who are likely to block any reforms that would harm their
own interests.
The Western media used to chastise Russia for allowing the oligarchs to
run the place. When Boris Yeltsin was president, it was difficult to
know who was calling the shots: the oligarchs or the president. The
oligarchs were, in fact, created by Mr Yeltsin’s controversial
privatisation, in which they received state assets at rock bottom
prices; and they continued to control the state throughout his
presidency.
When Vladimir Putin became president, he set out to wrest control back
from the oligarchs. One outcome was that Boris Berezovsky (who was
enormously powerful under Mr Yeltsin) and Vladimir Gusinsky went into
exile. Mr Putin’s “deal” with the others was that, provided they kept
out of politics, no-one would investigate their acquisition of state
assets.
Peace was achieved and Mr Putin got on with the challenging job of
forging a capitalist economy out of Russia. Reforms of the tax code and
land ownership are among his achievements and the economy is marching
ahead at a healthy clip.
But no-one should be under the impression that Russia has reached the
status of mature democracy. Given the upheaval and schisms of the past
decade, that would be highly improbable. Under those circumstances it
is best to back the reformers, even if their methods do not yet meet
the ideal.
In the furore between the now-jailed oligarch Mikhail Khodorkovsky and
Mr Putin, the stance of the Western press and investors to side with Mr
Khodorkovsky is ill advised. We do not yet know the outcome of the
fraud and tax evasion charges levelled against him but they are serious
matters even if the reason for prosecuting them was political (to stop
him financing opposition parties).
If Mr Khodorkovsky were to prevail, the likelihood is that Russia would
be thrown back into the Yelstin era and the reforms (or anything that
didn’t suit the oligarchs) stalled. Right now, the democratically
elected Mr Putin has to defend his turf by fair means as well as foul
if Russia is to progress further.