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What Did Putin Know, And When Did He Know It? (Int'l Edition)


International -- European Business: Russia

What Did Putin Know, and When Did He Know It? (int'l edition)

A media mogul's arrest has all Moscow guessing at its meaning

Big Brother, it seems, has returned to Russia. On June 13, media baron Vladimir A. Gusinsky was hauled off to Moscow's squalid Butyrskaya Prison by agents of the chief prosecutor's office. He was not formally charged, and his lawyer wasn't even allowed to visit until the next day. Gusinsky's independent NTV television station and other media properties have regularly and harshly criticized the Kremlin.

The arrest roused fears of a Soviet-style crackdown on the press. That's bad news for the Russian people. It may also prove unwelcome news for investors, who hoped the country, under new President Vladimir V. Putin, was finally getting its troubled political house in order.

Putin's role in this is murky. Gusinsky was arrested while the President was in Spain, pushing Russia as a haven for investment. Awkwardly, a Madrid businessman asked Putin at a meeting to explain why Gusinsky was being held. Putin said the arrest took him by surprise.

Many in Moscow are spinning theories of Byzantine machinations. According to one theory, a faction led by Chief of Staff Alexander Voloshin, an ally of business titan Boris Berezovsky, had Gusinsky arrested to humiliate Putin while he was abroad. Because some of Putin's allies despise Berezovsky and are urging Putin to arrest him--so the theory goes--Berezovsky may have been trying to send a signal through the arrest of Gusinsky that he can still dictate political events in Moscow. Former Soviet leader Mikhail Gorbachev, who knows a thing or two about such matters, said Putin was set up by Kremlin insiders seeking to undermine him. Berezovsky himself, however, called the arrest "very negative."

Of course, it's possible that Putin sanctioned the arrest and is dissembling about his role. "Gusinsky was openly against Putin, and Putin, in a very messy way, took him out," says economist Roland Nash of Renaissance Capital, a Moscow investment bank. Other arrests could follow, not just of other Russian oligarchs but also of corrupt government officials, predicts Valery N. Velichko, a well-connected ex-KGB official in Moscow who operates a private security company.

Whoever is behind the arrest, the Russian business community is understandably unnerved. Many businesspeople have spent the last decade maneuvering for access to political power. Now, with a leading, if not especially popular, executive in jeopardy, these folks are scrambling to find their voice as a protector of basic liberties. "This looks like violence on the part of the authorities toward its political opponents," a group of seventeen prominent Russian business leaders declared in a June 14 letter to Prosecutor-General Vladimir Ustinov protesting Gusinsky's detention. "Any of us may be put on the list of the opposition--practically the whole business community." Signatories included such Putin allies as Pyotr Aven, president of Alpha-Bank in Moscow. Major industrialists based in the provinces signed, too, including Alexei Mordashov, head of Severstal, a steel giant, and Kacha Bendukidze, who runs machine-tool maker Uralmash.PAYBACK. Influential legislative leaders are likewise concerned about a trend toward authoritarianism in Putin's Russia. Duma Deputy Irina Khakamada, a leader of the Union of the Right faction, declared after a meeting of mostly liberal members on June 14 that there may now be greater reluctance to give Putin the authority he has requested to fire obstreperous governors in Russia's regions. The Russian and Western business communities have mostly been supportive of such steps, viewed as necessary to bring order to the chaotic provinces.

Foreign investors have no illusions about Putin's commitment to a free press. Putin, after all, is an ex-KGB agent who has long made plain his unhappiness with press criticism of his Chechnya campaign. Gusinsky is expected to be charged with theft of $10 million in state property. But the manner of the Gusinsky arrest is a sign that the rule of law will be less than uniform in Putin's New Russia. That's bad for business, and bad for Russia.By Paul Starobin in Moscow


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