Letter by Mikhail Khodorkovsky
Vedomosti
December 28, 2004

Personal Property and Freedom

The destruction of ‘Yukos’ is coming to an end. I have done everything I could to prevent the authorities’ dislike of me from resulting in such consequences for minority shareholders, rank-and-file staff of the company, and for the country as a whole.

Six months ago I offered to surrender the shares that belong to me to satisfy the claims made against the company. However, a different means was chosen – the selective application of the law, the enactment and use of new, retroactive legal standards and interpretations, as well as the straightforward and public destruction of the business community’s confidence in the arbitration court and the authorities in general.

The concerted effort and complete audacity of the actions taken by taxation, law enforcement and judicial agencies, and companies connected with the government, as well as the overall pressure put on the managers and staff of the company, whose only fault was that they used to work under the direction of Khodorkovsky, leave no doubts that the trial was staged. Hundreds of people have been questioned, and completely implausible charges have been brought against many of them. Some people, including women, are being kept in prison.

Why? The answer is quite obvious: Don’t interfere in the looting of Yukos, but provide the evidence that will compromise Khodorkovsky.

It is now clear that not only political interests but other interests are involved as well, since the methods chosen to support these interests are detrimental to the reputation of the authorities and to the national economy. But those who started this do not seem to care about such trifling matters.

Today the issue is not the future of Yukos. Most probably it will be impossible to save the company. The issue is what lesson the nation and society will learn from the Yukos case, the final chord of which was the most senseless and destructive event for the country’s economy since President Putin’s term of office began.

Tyranny of Wealth

Yes, over the past year the $15 billion referred to by Forbes [Magazine] has shrunk practically to zero, and soon it will be absolute zero. However, I had realized that this would happen and suggested that the company and its minority shareholders should be left alone. I did so because I felt directly responsible to the 150,000 [Yukos] employees, the 500,000 members of their families, as well as 30 million inhabitants of the cities and settlements who depend on the smooth and uninterrupted operation of the companies.

I have been concerned about tens of thousands of Yukos shareholders who once made a decision that Khodorkovsky and his team could be trusted with their money.

And until recently one could assert that the shareholders’ decision was the right one. In 1995, when we – my team and I – joined Yukos, the company was operating at a loss, the debt on wages had been accumulating for six months, and the outstanding payables amounted to $3 billion. Yukos was only operating in nine regions of Russia, extracting 40 million tons of oil a year, while the volume of oil production was consistently dropping.

By 2003, Yukos was active in a total of 50 Russian regions, while the annual oil production amounted to 80 million tons with a distinct upward trend. Yukos was paying high wages to its employees on a regular basis: up to 7,000 rubles a month in the European part of Russia and up to 30,000 rubles in Siberia. At the beginning of the decade the company was the second largest taxpayer in the country (after Gazprom), accounting for almost 5 % of the federal budget.

I do not wish to discuss in great detail the wild imagination that invented the story of Yukos’ tax arrears. (According to the experts at the Ministry of Taxes and Levies, Yukos should be paying more than its revenues in taxes.) Methods such as these will be cited as a bad historical joke in textbooks on taxation law, since they prove that oil production in Russia is unprofitable. It is clear that government officials will stop at nothing for the sake of the redistribution of property.

However – though this may seem strange to many people – it will not be unbearably painful for me to give up my own personal wealth.

Following in the footsteps of many prisoners, both known and unknown, I must say thank you to the prison. It gave me months of [time for] deep contemplation and time to form a new outlook on many aspects of life.

And I have already realized that owning assets, especially large amounts of assets, does not make a person free at all. As a co-owner of Yukos, I had to make enormous efforts to protect this wealth. And I had to set limits for myself so that this wealth would not be jeopardized.

There were many things that I did not permit myself to say, because speaking openly could harm those assets. I had to close my eyes and put up with many things – all for the sake of my personal wealth, preserving and increasing it. I did not control this wealth alone – it controlled me as well.

So I would like to warn young people today, those who will come to power soon: don’t envy those people who own substantial assets.

You should not believe that their life is easy and comfortable. Wealth opens new opportunities, but in its turn leads to immobilizing a person’s creative potential, and to the disintegration of a person’s individuality as such. That is what this cruel tyranny shows – the tyranny of wealth.

And now I have been reborn. I am becoming an average person (economically I belong to the upper middle class) whose purpose is to live and not just own [things]. The struggle is not just to acquire property. The struggle is for oneself – for the right to be an individual. In this struggle, ratings, bureaucratic contacts and advertising gimmicks do not matter. The only important things are oneself, one’s own feelings, ideas, talents, will, intellect and faith.

This probably means that the only possible and right choice is the choice of freedom.

Uncontrollable Democracy

The Yukos events are directly connected with the authorities. What impact will the Yukos case have on the authorities? That is the most important question.

There is an old saying that each nation has the government it deserves. I would add that any government is the reflection of the people’s rigorous concept of the nature of power. That is why one can assert that in Great Britain, Saudi Arabia and in Zimbabwe, power belongs to the people. And the tradition of perceiving power is the basis for the stability of the state. So, talking of the ‘democratization’ of certain Arab monarchies on the basis of the Western model is as absurd as talking about the restoration of a medieval absolute monarchy in modern Denmark for example.

In this sense, Russian political tradition is artificial. Russia has always been at the crossroads of civilizations, but for the most part it is a European country. And therefore European political institutions envisaging the separation of powers can be applied in only a very limited manner in this country.

However, the other side of the coin should not be ignored. Russian people have traditionally regarded the state as a supreme power that gives them faith and hope. This power cannot be used until we cease to see it as supreme. Russian history tells us that loss of this special, supra-rational respect for the state will inevitably bring the country to chaos, revolt, and revolution.

Importantly, ‘authority’ should not be confused with ‘governance’. Governance is carried out by officials who are by no means holy cows [saints]. A bureaucrat is merely a mortal, responsible for all [kinds of] problems and failures.

The destruction of Yukos shows that when bureaucrats are let loose they can pursue goals other than those of the state, which is eternal and therefore powerful. They know that the state exists to serve their interests while other functions are temporarily (or permanently) abolished as unnecessary. They don’t have the slightest respect for the state, which they regard as nothing but a means to further their own ends.

That is why the Yukos case is not a state versus business conflict, but rather a politically and commercially motivated assault by one business group (represented by officials) on another business. The state here is hostage to individuals who are vested with state authority.

In keeping with this logic, the bureaucrats have decided to abolish the [concept of] separation of powers. Under the model that we have, every politician should be the same as an official. And being in politics should be the same as having a career within the rigid hierarchy of the bureaucracy.

What is the objective here? To mobilize the nation to reach for historic new achievements?! If he were really giving his honest opinion, not a single person close to the Kremlin would agree with that. In a private, untapped discussion he would tell you quite the opposite – that abolition of the separation of powers will make it easier for the bureaucrats to milk the country and divide the loot according to their ethical standards, without any regard for the interests and needs of ordinary people. End of story. But will this new system work? Will it lead its architects to their ultimate goals? No, it will not. These exercises in increasing “management” can in fact render the country totally unmanageable.

Why? Because it is inconsistent with the traditional rule of authority and the laws of complex systems that have been tested over centuries. Authority is always based on mutual agreement between the governed and the governing. Motivation can take a variety of forms, from promoting Communism to mundane universal enrichment. But the motivation must be present and the same for all.

This kind of agreement cannot be provided by hazy and inane officials who follow the “Mine, mine, mine…” principle. They don’t even understand the need for agreement.

That is why they are consistently destroying all the mechanisms of Russian public life: elections at different levels, competition, freedom of speech, etc.

But not a single real patriot will ever give his life for a handful of officials who care for nothing but their own personal gain. Not a single real poet will ever write a hymn of praise for them. Not a single scientist will ever aspire to great discoveries in a society in which no one gives a damn for his talent.

Very soon the only partner to this omnivorous bureaucracy will be a ferocious, amorphous crowd. The crowd will go into the streets and say, “You promised us bread and circuses! Where are they?!” Ironically waving a pack of old administrative documents will not do.

Then an unmanageable democracy will come into being, with all its innumerable disasters and suffering. This is what we should be concerned about.

What is going to happen?

I would like to participate in making our country free and prosperous.

But if the authorities decide I must stay in jail, I can wait.

As a simple, post-Soviet convict I can only pity the greedy people who have acted so cruelly and outrageously towards tens of thousands of Yukos shareholders. There are long years of fear of the new generation of expropriators in store for these shareholders, as well as fear of real, not ‘Basmanny’ justice. Because no one but the most naпve viewer of the national TV channels still believes that this whole process is in the interests of the entire nation.

I have even greater pity for those authorities who sincerely believe that what they are doing is a good thing. The road to hell is paved with good intentions. History shows that they will eventually realize that political persecution and forced redistribution of property cannot be combined with modern economic development. The reach of the political machine will not be confined to Khodorkovsky, Yukos or current oligarchs – it will drag down many others, including today’s architects and creators.

My persecutors know that my criminal case contains no proof of any guilt whatsoever.

But that is irrelevant since they can indict me on some other charge, for instance on the Manege fire or on economic counter-revolution. I have been told that they want to put me in jail for five years or more because they fear I will seek revenge.

These clueless people think they are a benchmark for everybody else. Relax; I am not going to be a Count of Monte Cristo (or even a supervisor of an apartment building). Breathing the spring air, playing with kids who are going to a regular Moscow school, reading good books – all these things are much more important, pleasant and right than dividing up assets and settling the score with the past.

Thank God, unlike my persecutors I have realized that making big money is far from the only goal in a man’s life (and probably not that important). The time of big bucks is over for me. Now that I have disposed of the burden of the past, I am going to work for the good of the generations who will rule the country very soon – the generations who will usher in new values and new hopes.

Author: Private individual, citizen of the Russian Federation, IZ No.99/1, Moscow. (Vedomosti, 12/28/2004)