"We mustn't let the lure of trade blind us to Russia's failings"

During the cold war, Russian dissidents tended to be intellectuals: poets, artists, scientists. Mikhail Khodorkovsky does not fit that pattern. He is one of a post-Soviet generation of businessmen who acquired lucrative shareholdings in state enterprises in exchange for supporting the former president, Boris Yeltsin. Most Russians consider that deal a colossal theft of public assets. The beneficiaries became known as the oligarchs.

Now Mr Khodorkovsky is in jail, convicted of fraud in 2005 and facing new charges that would see him imprisoned for another 20 years. His fate reveals a lot about the direction Russia has taken in the decade since Vladimir Putin took power.

Mr Putin offered the country's media and energy barons a deal. They could keep some of their wealth if they renounced any ambitions to meddle in politics. Most acquiesced; Mr Khodorkovsky did not, seeking to fund liberal trends in an increasingly authoritarian, nationalist climate. That is why he lost his freedom.

Opines The Observer from London today in an absurd and craven editorial ( We mustn't let the lure of trade blind us to Russia's failings September 19 2010 ).

Khodorkovsky lost his freedom because he was a crook and because Putin decided to make an example of him. If The Observer was to be logical, it would demand that more oligarchs should be in prison and not only Khodorhovsky. Misha Glenny in McMafia:Seriously Organised Crime has zero sympathy for one of the worst robber barons,

"Under Putin, the Kremlin has clipped the wings of several of the most powerful oligarchs. From exile in the West or from inside prison, oligarchs like Boris Berezovsky and Mikhail Khodorkovsky warn that the new President is the reincarnation of Stalin. But he isn't.

He has fashioned a novel system that brings together aspects of capitalism and Soviet socialism-market authoritarianism. The oligarchs desperate attempts to portray Putin as a new Stalin seek to conceal the primary responsibility they bear for the mess in which they and Russia find themselves"

Glenny ( page 83 )

The reaction in Britain to Khodorkovsky's imprisonment reeks of sententious and pious moralising in due proportion to an unwillingness to admit that the reason it supports the former Yukos oil boss and to oppose Putin lies in it being displeased at having its geopolitical interests curtailed.

Even on its own supposedly moral grounds, the standard line from London's media and finance elites hardly holds up. Few hold up China, with the largest numbers of executions per year in the world and the death penalty for corruption, to the opprobrium Putin is for jailing Khodorkovsky, despite the fact that he was guilty of great crimes,

As Business News Europe reported on September 6th, 2010:

The trouble with this whole story is that even if the forces of law unfairly picked on Khodorkovsky, he is "guilty as charged" says Peter Clateman, a lawyer for Renaissance Capital in Moscow who has been following the case closely. To be fair most observers have criticised the first trial, but no one pretends that Khodorkovsky’s trial had much to do with the letter of the law or was about “guilt” or “innocence.”

All the oligarchs were blatantly stealing everything they could in those days, so the issue isn't whether the law was use to lock up Khodorkovsky and expropriate his company, it's why all the other oligarchs weren't arrested and locked up too.

Khodorkovsky may be a victim, or better to say loser, of the political showdown with the Kremlin, but he is also certainly not the martyr the international press and leader writers in most of the international press make him out to be. Indeed, he started his corporate life as the very worst corporate governance abuser, which in Russia circa the mid-1990s is saying a lot.

But since then, Khodorkovsky has been careful to manufacture an image by spending millions of dollars on the best law firms, lobbyists and PR that money can buy – with so much success that no one remembers the "old Khodorkovsky" when he had a moustache, wore shabby suits and big black, TV-frame glasses and would dilute your stake to zip the moment you invested into one of his companies. "

The propaganda power and legal team Khodorkovsky has been able to assemble to insinuate that he is some kind of "dissident" or political prisoner-without actually using such a word-ignores the fact that he was a corrupt oligarch who deserves to be in prison. The "political prisoner" tag is applied because other oligarchs were not charged.

Edward Lucas has been critical of those who maintain that anti-Putin propagandists as himself are portraying Khodorkovsky as a dissident. Even if the word is not used, the image is with the fallen oligarch now meant to elicit sympathy through pictures of him sitting in bare cells with a simple wooden table and a packet of L & M cigarettes on the table.

But Khodorkovsky was one of the largest robber barons and the defence coming from those like Edward Lucas and from his lawyer Robert Amsterdam, as well as uncritical and simplistic "liberal interventionists", and has ample access to the Western media as it wishes to give this crook a platform because he benefitted Western business and banking interests.

The prating about the "rule of law" now from Khodorkovsky ihnores the extent to which he was never even a businessman. As Aris put it,

Oligarchs are not businessmen, they are opportunists. They got so rich so fast because they saw – only a few months before everyone else – how the collapse of the Soviet Union could be turned to their advantage as long as they acted quickly and ruthlessly.

According to bne sources, the actual idea for the makeover was not Khodorkovsky's; a group of bankers from Brunswick (which later sold out to UBS in 1997) went to see Khodorkovsky and explained that the most he could ever get out of Yukos was the $2bn annual revenue. But if he could turn his image round, then he could make far more from the share appreciation; at the start of 1999, Yukos' shares were trading at a price/earnings multiple of 1.3x, way below its Russian peers that were trading at multiples of 6.8x.

Khodorkovsky seized on the idea and threw himself into the task of cleaning out his own Aegean stable. It is a testament to the shortness of investors' memories that he was so spectacularly successful. Within three years, Yukos was the doyen of good corporate governance in Russia and Khodorkovsky was the 16th richest man in the world. Harvard Business School wrote a paper on the "Khodokovsky effect," which saw this good corporate governance spread to other Russian companies as the country's oligarchs looked on amazed.

The reason is that Putin basically did choose to make an example of Khodorkhovsky for his fraud and tax evasion was for the reason that he could-Khodorkovsky is not a man who really believes in "fair practice" and his Yukos business used contract killings to advance its interests-is part of gaining state control over Russian resources.

Naturally, Britain opposes that as its oil interests have been adversely affected in places like Sakhalin Island where previous contracts with BP have not been honoured. Though that could be portrayed as not "fair play", Putin's state has the opinion that it has the right to control resources for the national interest.

For those railing against such nationalism as a primitive remnant of the past in Europe, it worth remembering that Scottish nationalists have fumed consistently about how Scottish Noth Sea Oil was spirited away by mostly English interests and that had Scotland been independent in the 1970s, it would now be as rich as Norway or Switzerland.

Putin's sovereign democracy has it that Russia's resources should be used for the Russian national interest and so, following the looting of the Russian economy during the Yeltsin years by the oligarchs and Western business interests, the "dictatorship of law" should be applied. A strong state would be the precondition for the evolution of civil society in Russia.

Hence continual prating from the West on the Khodorkovsky case has only bolstered Putin's credentials as he can point to the external threat from those who really would like to see a return to a Russia where the preferred oligarchs can be esconced in power once more. Not only is Western support for Khodorkovsky unethical it is also deeply stupid and unrealistic.

Hypocritical editorials from The Observer only go further to confirm that "liberal interventionism" and the anti-Russian diatribes of Edward Lucas and those like David Miliband are an ideological rationalisation of British interests at the expense of Russian power and security.

However repressive Putin's regime in Moscow appears, it is important to realise that by historical standards it is a vast improvement and living standards have risen compared to what they like during the 1990s when few in the West piped up about Yeltsin's brutal coup d'etat of 1993.

Even under the Tsars in the Patriotic War against Napoleon in 1812 or the Great Patriotic War on 1941-45, Russian people rallied to defend a repressive regime instead of anything imposed on them from abroad. With a regime that is not repressive by historical standards, most Russians will not be lectured to by those supporting Khodorkovsky.

That does not mean that the abuses and undoubted corruption should be ignored. But that realistically, those who maintain hypocritical double standards about Russia have any moral high ground upon which to lecture it and, moreover, that as part of British diplomacy it is utterly counter productive.