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Broken Scales In Russia


Will Russia ever really change? That question has surely occurred to anyone who closely followed the disturbing trial of Mikhail Khodorkovsky, the former chief of Russian oil giant Yukos. On Mar. 31, Khodorkovsky was finally sentenced to a 9-year prison sentence. That followed an 11-month trial and a verdict that took 12 days to read. Maybe Khodorkovsky did actually break the law, but we'll never know for sure. That's because the case against him was so clearly politically motivated, its conduct so one-sided, and its outcome so obviously predetermined that justice and legality had little to do with the proceedings.

Just ask U.S. President George W. Bush. When queried about the Khodorkovsky case, he noted the stark difference between Western and Russian justice. Said Bush: "Here, you're innocent until proven guilty, and it appeared to us, at least people in my Administration, that it looked like he had been judged guilty prior to having a fair trial."

Indeed, although Khodorkovsky was charged with fraud and tax evasion dating from up to 10 years ago, few see much real difference between his activities and those of most other businessmen in Russia at the time. In fact, Khodorkovsky's real crime seems to have been posing a political challenge to President Vladimir Putin. The cocky tycoon funded political parties and lobbied against legislation backed by the Kremlin. Putin retaliated by staging what appeared at times to be a show trial, apparently designed to warn Russian business to stay out of politics. In the process he also showed something even more disturbing: that Russia still lacks anything even resembling an independent judiciary.

Instead of enforcing the law impartially, the nation's courts increasingly dispense arbitrary justice, reinterpreting as many laws as necessary to get the required result. For example, even Russia's own laws don't allow police to search the offices of defense lawyers. But that didn't stop investigators from doing so in the Khodorkovsky case. Both lawyers and defense witnesses were intimidated by threats of prosecution. And then there's the astounding $28 billion tax claim levied against Yukos. The sheer size of the tax judgment suggests that the real aim was to justify the confiscation of Yukos' assets by the state, giving control of its valuable energy holdings to officials closely allied to the Kremlin.

To be sure, Russia's legal system was never a bed of roses. Past Russian oligarchs, as well as state authorities, have also manipulated courts to their advantage -- leaving many foreign investors without legal protection when disputes arose. But many sincerely believed that the situation would improve under Putin, himself a trained lawyer who once promised to make reform of the courts a priority.

With the ham-handed handling of the Khodorkovsky trial, those high hopes have been left in tatters. Sadly, it appears that in Russia, staying on the right side of the Kremlin counts for more than staying on the right side of the law. Given the remote prospect of positive change in Russia's politics anytime soon, that's hardly reassuring news for foreign investors.


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