Robert Amsterdam

Political Prisoners in Today's Russia: Alexey Pichugin

By Grigory Pasko, journalist

Few people remember these days how the so-called “YUKOS case” first began with the arrest of this very person. It should also be noted that Pichugin’s name is heard less often in the mass media than the names of Khodorkovsky and Lebedev.

Pichugin is a former employee of the YUKOS oil company’s security service, and it was with his arrest in June 2003 that the so-called “YUKOS case” formally began. What we do know about him is that he has awards for distinguished service in the organs of internal affairs and state security. In March 2005, he was found guilty of a double murder and sentenced to 20 years of deprivation of liberty. A month after this, the Procuracy-General presented him with new charges. The court once again found Pichugin guilty and sentenced him to 24 years of deprivation of liberty.

Alexey Pichugin was born in 1962 in the city of Orekhovo-Zuyevo of Moscow Oblast. In 1979, he finished school and began studies at the Higher Command School of the Ministry of Internal Affairs in Novosibirsk. Since 1983, he underwent service in military units of the MVD [Ministry of Internal Affairs—Trans.] in Tula Oblast.

In 1986, Pichugin entered the school of the Committee of State Security [KGB—Trans.] of the USSR in Novosibirsk. From 1987 to 1994, he worked in the Military Counterintelligence Administration of the KGB (subsequently the FSK). In 1994, he quit the FSK [Federal Counterintelligence Service—Trans.] with the rank of major. After leaving the FSK, Pichugin was hired to work in the security service of bank “MENATEP”, and in 1998, after the bank had acquired “YUKOS”, he transferred to work in this oil company. There, he headed the internal economic security department, which was part of the “YUKOS” security service.

Alexey Pichugin was detained in June 2003 and placed in the «Lefortovo» SIZO isolator, which is under the jurisdiction of the FSB. Prior to this, searches had been conducted of Pichugin’s apartment and workplace. Pichugin was denied the right to the presence of his lawyer during the search. Taken from Pichugin’s office was a safe, which was then opened in the building of the Procuracy-General.

On 21 June 2003, the Basmanny Court of Moscow issued a sanction for Pichugin’s arrest.

On 4 October 2004, the Moscow City Court began consideration of the case on the merits. On 24 March, a jury found NK YUKOS employee Alexey Pichugin guilty on all counts. In the verdict of the jurors, it was noted that A. Pichugin is not deserving of leniency. Defence lawyers noted that before the jury’s verdict was issued, judge Olikhver voiced a parting word, which lasted two hours and was more reminiscent of a retelling of the bill of indictment.
Ms. Olikhver, in particular, familiarized them with the testimony of previously convicted participants in the Tambov grouping who had appeared as witnesses in the given case. And the judge ended the valedictory by asking the jurors not to pay attention to contradictions existing between the testimony these had given in court and during the time of the investigation.

The jurors only issued their verdict at 9:30 at night. By a majority of votes (eight versus four), they found Pichugin guilty on all counts and not deserving of leniency. True, at the same time, they considered that Mr. Pichugin had contracted not the murder of former head of the ZAO «Rosprom» business administration department Sergey Kolesov, but his beating.

On 30 March 2005, Moscow City Court judge Natalia Olikhver issued a verdict to Alexey Pichugin. The NK YUKOS employee was sentenced to 20 years of deprivation of liberty in a strict-regime penal colony.

The third All-Russian Civic Congress (ARCC) took place in Moscow on 11 and 12 December 2006. Around 500 persons took part in it.

If anything, the greatest interest, both among the participants and among the mass media, was caused by the panel on “Restrictions on the forms of public-policy activeness and persecution for political and civic activities”. Its moderators were Lyudmila Alexeyeva (Moscow Helsinki Group) and Lev Ponomarev (the «For human rights» movement).

The speakers told with bitterness about how political prisoners have once again appeared in Russia, which considers itself a democratic country.

The participants, having unanimously supported the resolution of the second All-Russian Human Rights Congress that took place the day before, named, among others, have called the victims of the “YUKOS affair” as such [political prisoners—Trans.]: the businessmen Mikhail Khodorkovsky and Platon Lebedev, the lawyer Svetlana Bakhmina, the lawyer Vasily Alexanian, the head of the economic security branch of the oil company Alexey Pichugin, and others arrested in this affair.

It is noteworthy that the charges against Pichugin evoked bewilderment from the legal point of view not only among lawyers. Here, for example, is what Alexey Venediktov, editor-in-chief of radio «Echo Moskvy», had to say in the program «Essence of events» in December of last year.

“The verdict of the court that found Pichugin guilty did not convince me… They did not prove to me that he is a criminal. Several books have come out dedicated to this case, so to speak, to the so-called murder. There are no bodies. All the clues – this has been proven in the trial records – were found a year after the murder. Moreover, they had looked and not found anything, and then they found them in the very same place – in the same place, on a little stone. Everything else is based on the testimony of people who have been sentenced to life imprisonment. They find people in the prison camp who say ‘Yes indeed, he gave us instructions’. Many years after the event. For me, this is not convincing… There is a rule ‘No body, no case’. In the given instance, this is maybe even the only instance where this rule was overridden. Why such an exception? Whence such an exception? Why did such a thing happen? Super-such [sic]. How many murders in Russia, how many disappearances in Russia – and there are no such cases. And here, this is the only one, unique, and it just happens to be associated with ‘Yukos’.”

Of all the people convicted in the “YUKOS case”, Pichugin received the longest sentence – 24 years. In the conditions of Russian prison camps, this is the same thing as a life sentence. Why such an enormous term? For what? What did Pichugin know and not tell the investigation that he was so demonstratively sentenced to a long term? We may suppose that Pichugin did not want to besmirch Khodorkovsky and the others charged in the “YUKOS case”. In addition, experience shows that former officers of the KGB-FSB receive much longer sentences than those who did not serve in these organs. This is revenge of sorts from their colleagues at the firm. Shop-floor revenge. The same thing that Alexander Litvinenko was sent to kingdom come for.

Today Alexander Temerko, the former vice president of Yukos, has a column running in the Wall Street Journal.

Excerpts:

Russian capitalism is not an imperfectly evolved version of that practiced in developed countries. Russia has created a form of capitalism never seen before. Unless you have your own private mole in government, you will never be able to predict your returns with any confidence. Directly or indirectly, corporate authority ultimately rests with the state in Russia.

Take Rosneft, the recently floated oil giant. Attentive readers will recall that I strongly criticized of the Rosneft flotation in this column last May. Some might even think that my warnings were ill-founded, and that the IPO was a great success. Far from it.

With the government's full support, Rosneft strong-armed BP and other strategic investors eager to operate in Russia into buying large blocks of shares. As a consequence, Rosneft has a free float -- i.e. tradable shares not owned by insiders and direct investors -- so thin that, were it a British company, it would be in serious breach of U.K. trading rules.

In the U.K., trading rules require a free float of at least 25%. Yet Rosneft's free float is a fraction of 1%. How can this be? Well, the rules apply only to shares that can be traded in London. In Rosneft's case, and that of nearly all other London-listed Russian stocks, shares traded outside Russia are global depository receipts, which represent only 10% of Rosneft's total shares issued. The 25% rule is applied only against GDRs and, by that meaningless measure, Rosneft passes the test. As a consequence, Rosneft's share price is almost entirely insulated from international investor sentiment. The only shareholders who count are in Russia. And of those, the dominant players are the state-controlled banks, especially Vneshtorgbank and Sberbank.
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In short, Moscow -- an "insider" to almost any major share transaction in Russia -- can do virtually whatever it chooses to do with share prices. But state involvement does not stop there. Corporate governance is directly supervised by the government, which vets all board and senior management appointments for companies with direct or indirect state ownership. Ministers and leading bureaucrats also serve as executives or board members of the biggest companies under direct or indirect state control, and all are paid supplementary stipends.
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All this should be of grave concern to international investors. Having raised more than $17 billion in 2006 -- 50% more than was raised over the past five years combined -- Russian companies coming to market in London should have been heralding bigger opportunities. Instead, they represent the ruling elite's bet that Russia Plc can exploit capitalism for its own purposes.

I attach here an "abridged" translation of an op/ed article I wrote, published in today's „die Tageszeitung“ newspaper of Germany. A scan of the original print version of the article can be downloaded here.

Careless and Ignorant

By Robert Amsterdam

Today a tremendous amount of attention in Germany is focused on questions about the true nature of the German-Russian relationship – and its impact on energy security in Germany and throughout Europe. In the meantime, it is the German consumer who is ultimately paying for the antics of the German energy companies and financial institutions tied to Russia.

Politicians and business leaders attempt to justify Germany’s decision to partner with Russia against Europe in various ways. One is by reference to the tragic history of German-Russian relations – a moral justification for deference to Moscow’s needs, as long German industries are benefiting. Another justification for partnering with Moscow is that Russia cannot be compared to Nigeria – those who wish to address human rights should first analyse the situation in countries comparatively far worse off than Russia. From Klaus Mangold to Gerhard Schroeder, Germany’s apologists of Russian energy imperialism view Moscow’s bullying tactics through only one angle of concern – was Germany given enough notice?

As a source of capital and for the veneer of legitimacy that German partnerships lend to the Russian state, German industry is in fact funding Russian hubris in foreign energy relations, and Russian intransigence in refusing to ratify the Energy Charter.

Germany’s departure from morality, ethics and democratic thinking in its cosy energy politicking with Russia is in fact inconsistent with longer term German interests. Those who attempt to spread false characterisations of the situation risk doing great damage to the European ideal in general and to German democracy in particular.

How did the cozy German-Russian relationship develop? Some basic investigatory work would reveal a revolving door of energy executives travelling between the major German energy companies and the SDP. Combine that kind of activity with political contributions and the ethical void of Germany’s most recent ex-Chancellor, and Germany’s current energy strategy is both understandable and shameful.

The Russians are delighting in the new influence that their cooptation of Germany has yielded. Through their relations with Germany the Russians have driven a wedge into Europe while simultaneously creating dependencies across the continent for their energy supplies.

For the past five years Mr Schroeder has consistently ignored the gradual rollback of political rights in Russia – which is surprising considering his earlier concern, as Chancellor, over Russia’s human rights record, particularly in Chechnya. Mr Schroeder has consistently derailed attempts to exert Western pressure on Moscow over its growing abuses of power. While Russia was backsliding, Mr Schroeder focused only on deeper commercial and political ties for Germany. Mr Schroeder’s silence over the regressions of the Russian leadership shows to what extent he was co-opted by Russia’s new energy barons.

It is not a secret that Russo-European energy relations have become increasingly asymmetrical, in Russia’s favour. The new umbilical cord joining Germany to Mother Russia will be the uneconomic Nord Stream pipeline. Currently in the advanced stages of planning, the costs of the undersea pipeline will run some three times as expensive as a new pipeline running along existing routes over land. The Nord Stream pipeline will risk the fragile ecosystem of the Baltic Sea at tremendous expense – just so that the Russians can avoid transit fees?

With the pipeline delivering exports directly into Germany, Russia will then be able to cut off gas to Ukraine, Poland and the Baltic States without directly affecting European supplies – and based on Russia’s recent behavior, there is nothing to suggest that this is not a real threat. Ultimately, pipelines serve primarily the suppliers’ interests, particularly when connected to long-term contracts. The Russians lure European business with pledges of upstream assets.

Yet post-Yukos, post-Sahkalin and, soon, post-BP, what are those pledges really worth? The Russian administration has established a track record of bending rules and bullying foreign investors, with the active support of the prosecutor, tax authorities, regulatory agencies and courts. The authorities are not afraid to push aside even the biggest foreign investors. And foreign investors are not the first victims. The centralisation of power in Moscow in recent years has constituted a drastic retreat from commitments to a competitive market economy, democracy and the rule of law.

In addition to lack of respect for fundamental property rights and other legal rights, the unwillingness of the Russians to open up their market is not only fundamentally unfair, but also guarantees energy insecurity.

The truth is that the Russian leadership clearly does not respect sanctity of property, on its own soil. Yet it covets the midstream or downstream assets in Europe.

The corruption and negligence of Russian state energy enterprises are well documented by no less than the IEA and World Bank. In Germany, meanwhile, it seems extremely difficult for the truth to come to light. Is this perhaps explainable by the enormous commercial interests that Germany’s main banks have in assisting the Kremlin in its illegal, yet faraway, expropriations?

The Yukos Affair would never have reached an expropriatory crescendo without the silence, if not active support, of the German banking and political elite. Their main concern, as the Yukos Affair unfolded, was how Germany and its banks could profit from state theft. This moral disengagement was not only dangerous for Russia but also for the strength of democratic principles in Germany. Surely German citizens are aware that the support by Chancellor Schroeder of a regime that closes the press, attacks NGOs, expropriates property in show trials and targets ethnic minorities is simply inconsistent with the German idea and that of Europe.

Meanwhile, the energy prescription for Germany – and Europe – should be based purely on risk management – through the diversification of supply sources, massive investments in LNG and a strong push in favour of the Nabucco pipeline and interconnectors between the Mediterranean rim countries. Such developments push Europe towards one rational energy market.

A persistent stance against corruption is the sine qua non for energy security. Russia’s Gazprom cannot be a partner to Europe while it fails to invest in its own infrastructure, arranges the deportation of responsible lobbyists for corporate governance, invests 14 billion dollars in non-core assets, such as news media, and is run from the Office of the Presidential Administration of Russia.

In 2006 the World Bank ranked Russia 151st of 208 countries in terms of political stability, democratic voice and accountability, effectiveness of government, quality of regulatory bodies, rule of law and control over corruption. That put Russia overall in the league of Swaziland and Zambia, and just ahead of East Timor. What does that say about the impact of its partnership with Germany?

Today and tomorrow are major media days for Russia. In addition to the annual news conference (which apparently broke records - lasting 3 hours, 32 minutes, with President Vladimir Putin answering 69 questions from 1232 journalists), Russia's Ambassador to the United States, Yuri Ushakov, also published an op/ed in the Los Angeles Times. Tomorrow in Europe many more news stories will surely follow.

Initial coverage: AP, FT, Reuters, BBC, RIA Novosti, and Radio Free Europe.

It seems that everyone is on strict orders to toe the party line in regards to the energy issue - in other words, strategically deny the imperialism charge as an "unfair suspicion," paint yourself a victim of the foreign press, then explain away the aggressive policies as merely market-oriented reforms, and reiterate the "commitment" and "obligations" to supply agreements. For good measure, add an incredulous question to your statement.

Putin, as quoted by RIA and AP:

"An argument is being imposed on us that Russia allegedly uses economic levers to attain its ends in international politics. This is not true. Russia has been meeting all of its obligations in full, and will continue to do so in the future," Putin told a Kremlin news conference.

AP: "We're not obliged to subsidize the economies of other countries," Putin said. "Nobody does that, so why are they demanding it of us?"

Ushakov in the LA Times:

Russia is frequently accused of "energy imperialism" — using its exports of oil and gas as a tool of its foreign policy. But the truth is that Russia and even, in the old days, the Soviet Union, never violated commitments to supply energy to customers who pay their bills in full. Contrary to the accusations that have been made against us, we have supplied Europeans and other consumers with every cubic foot of natural gas and every barrel of oil that we contracted to provide. In regard to Ukraine and Belarus, we are moving to market prices, ending previous practices of subsidizing their economies. What's wrong with that? Nobody asks the United States to provide subsidies to Canada, Mexico or, for that matter, Cuba. Our goal is to create a standard business relationship with every country, which has nothing to do with "energy imperialism."

(stay tuned for press release)

PRESS RELEASE - PRNewswire:

Khodorkovsky Lawyer Says Putin Fails To Recognize Russia’s True Detractors
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LONDON, UK - February 1 – Following President Vladimir Putin’s extensive comments to the international media today regarding “unfair” suspicions toward Russia and the denial of his administration’s use of energy as a political weapon, Robert Amsterdam, lawyer for Mikhail Khodorkovsky, issued the following comments:

“President Putin’s contention that Russia is innocently putting an end to energy subsidies and does not use its oil and gas as political tools is wholly implausible. Prices are going up everywhere except for Russia, where he is using energy rents to subsidize a broken system, consolidating power and imprisoning those who stand in the way. If energy were truly not a political weapon for Russia, than Gazprom would no longer be the sole exporter of gas to Europe,” Amsterdam said.

Amsterdam has long argued that Russia’s policies seek to turn Europe into an “energy hostage,” subject to the objectives of a foreign power. In an article published today in the German newspaper Die Tageszeitung, Amsterdam argued that former Chancellor Gerhard Schroeder has accepted enormous personal gain to play an instrumental role in the compromising of Europe’s energy security.

“President Putin should not be attacking those who create so-called false impressions in the foreign press, when at the same time he is attacking what’s left of Russia’s free press and civil society, who attempt to portray the reality of Russia from inside,” he said. “If the president really wants to fight back against those who wish Russia ill, he must start by recognizing who the country’s true detractors are.”

“Instead of pouring $11 million into public relations for Gazprom, let him spend this money on finding the real killers of Anna Politkovskaya and others who fight for freedom in Russia,” Amsterdam said. “Let him use these resources to track down those who smear the name of Russia by using radioactive poison on the streets of Russia. Let him investigate those corrupt individuals within the procuracy who at this very moment are preparing new, invented charges against Mikhail Khodorkovsky designed to prevent his parole before elections. No matter how much President Putin and his advisors spend on public relations, so long as he refuses to recognize that the system is broken there will always be a deficit of those who believe him.”

Robert Amsterdam, founding partner of Amsterdam & Peroff, is international counsel to the political prisoner Mikhail Khodorkovsky. He writes a blog at www.robertamsterdam.com.

Despite resolutely denying any possible consideration of creating a gas cartel with Iran just a few days ago, today the Wall Street Journal is running a big report about Russia being "in talks" regarding the issue.

Jan. 31 - Radio Free Europe - "Russia Denies Plans for Gas Cartel"

Feb. 2 - Wall Street Journal - "Russia and Iran Discuss a Cartel For Natural Gas"

Russia and Iran -- which hold nearly half the world's natural-gas reserves -- are talking about creating an OPEC-like organization for gas, a move that has the potential to unsettle energy markets and redraw geopolitical alignments.

Gas accounts for a growing share of global energy use, but the nations that produce most of it don't work together to influence markets. That's a stark contrast to the oil market, in which members of the Organization of Petroleum Exporting Countries manage output to keep prices at levels they favor.

During his annual news conference in the Kremlin yesterday, Russian President Vladimir Putin said "a gas OPEC is an interesting idea. We will think about it." His comment comes days after Iranian Supreme Leader Ayatollah Ali Khamenei publicly called on a visiting Kremlin official to establish a group of natural-gas producers similar to OPEC. Russia and Iran are the world's largest and second-largest holders of gas reserves, respectively.
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It isn't known exactly how a gas cartel would operate, but OPEC has been a huge market force for decades. For a period in the 1970s, OPEC members set prices for their oil, and Western countries paid up. But oil demand eventually fell because of the high prices. In response, OPEC started cutting back output to influence prices and let market forces do the rest. That is still the strategy it employs today: In recent months, alarmed about falling oil prices, OPEC announced production cuts totaling 1.7 million barrels a day.

Talk of creating a gas cartel appears partly to be an outcome of dissatisfaction among gas suppliers with the emerging international gas market. After investing billions of dollars into boosting output over the past five years, "it's difficult to place all of this gas in the market at a price that they're comfortable with," says Ira Joseph, executive director of international gas at PIRA Energy, a New York-based energy consultant. The discussion of a cartel, he says, is "in large part a reflection of that."

Kommersant reports that Ella Pamfilova, head of the presidential council on civil society institutions and human rights, has issued some tough comments against the recent human rights report from Freedom House.

Kommersant:

Russian Officials Lash Out at a Human Rights Report

Russian officials lambasted a recent human rights report of the Freedom House NGO on Thursday calling its findings “absurd” and “exaggerated”. The report maintains that in terms of political and civil liberties Russia falls into the category of “not free countries” along with Cuba, North Korea and Libya.

The annual Freedom in the World report caused a real uproar in Russia. The Foreign Ministry declined to comment, calling the findings in the report “absurd”. Ella Pamfilova, head of the presidential council on civil society institutions and human rights, told Kommersant that it is former CIA employees who shape Freedom House’s ideology. “This report is all the more regrettable as Russian bureaucrats will not take activities of human rights defenders seriously because of this kind of opuses.”

In its freedom rating for 2006, Freedom House has put Russia among “not free” countries. Russia has scored its lowest rating in 16 years, being ranked close to North Korea, Cuba, Gabon, Libya and Pakistan.

Meanwhile, Russian human rights activists consider the Freedom House’s conclusions quite fair. “How can one argue that the situation with human rights in 2006 didn’t become worse than in 2005?” Yury Dzhibladze, director of the Human Rights Institute, told Kommersant. “Do we have independent court system? Do we have many free media?” Mr. Dzhibladze said the comparison with North Korean may be painful for the country which strives to become a world economic leader, but authorities ought to consider it “as a signal” that the issue of human rights and political freedoms must be addressed.

Christopher Walker, one of the report’s writers, says the rating did not mean to equate the level of human rights in Russia with that in North Korea. “We just wanedt to show that Russia is moving in the wrong direction and it goes farther away from free countries.”

Russia's most famous contemporary novelist Vladimir Sorokin gave an interview with Der Spiegel today, calling out the current Russian administration for backsliding freedoms, authoritarianism, and the troubling indifference and confusion on behalf of the west.

"Only in the last 15 years have the Russians managed to dress up and eat their fill. However, people with full bellies tend become drowsy. This explains, for example, the disinterest among students. In no other country are they as apathetic as they are here."

Excerpts from Der Spiegel:

SPIEGEL INTERVIEW WITH AUTHOR VLADIMIR SOROKIN

"Russia Is Slipping Back into an Authoritarian Empire"

Russian author Vladimir Sorokin disscusses waning freedom of opinion in his country, the lack of opposition against President Vladimir Putin and dangerous Western ambivalence that is enabling the Kremlin's growing authoritarian tendencies to take root.
...
Sorokin: Germans, Frenchmen and Englishmen can say of themselves: "I am the state." I cannot say that. In Russia only the people in the Kremlin can say that. All other citizens are nothing more than human material with which they can do all kinds of things.

SPIEGEL: In old Russian, the word "oprichnik" means "a special one." Do you feel that the divide between the top and the bottom in Russia today can no longer be bridged?

Sorokin: In our country there are special people who are permitted to do anything. They are the sacrificial priests of power. Anyone who is not a member of this group has no clout with the state. One can be as pure as can be -- just as magnate Mikhail Khodorkovsky was -- and still lose everything in a flash and end up in prison. The Khodorkovsky case is typical of the "oprichnina" -- the system of oppression I describe.

SPIEGEL: Does a character like Khodorkovsky appear in your book?

Sorokin: Such a parallel didn't occur to me. However, my book does begin with an attack on a rich man. This is almost a daily occurrence nowadays. It has always been that way in Russia. Only those who are loyal to the people in power can become wealthy.
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SPIEGEL: Criminal proceedings were launched against you five years ago for supposedly pornographic passages in your novel "Blue Bacon Fat." Is censorship about to be reintroduced in Russia?

Sorokin: What happened at the time was an attempt to test writers' steadfastness and the public's willingness to accept open censorship. It didn't work.

SPIEGEL: Did the pressure that was applied to you intimidate other writers?

Sorokin: Certainly. I have Mikhail Gorbachev and Boris Yeltsin to thank that a Russian writer can not only write anything he wants today, but also publish it. I don't know what will happen in the future. The media -- television, newspapers and magazines -- are already controlled by the state today.
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SPIEGEL: How should German politicians, including Chancellor Angela Merkel, behave in dealing with the Russian government?

Sorokin: The West should be even more vocal in insisting that the Russians respect human rights. All compromise aside, I ask myself whether Russia is moving in the direction of democracy. I don't believe it is! Bit by bit, Russia is slipping back into an authoritarian empire. The worst thing that can happen to us is indifference in the West -- that is, if it were interested in nothing but oil and gas. I am always surprised when I watch the weather report on German television. First they show the map of Europe and then the camera moves to the right. Then comes Kiev, then Moscow and then everything stops. This seems to be the West's view of us -- of a wild Russia that begins past Moscow, a place one prefers not to see. This is a big mistake. The West must pay closer attention.

SPIEGEL: Does the West understand Russia?

Sorokin: Yes and no. In Russia no one is surprised when an official accepts a bribe while at the same time portraying the state as some sacred entity to which the bourgeois should pay homage. This all sounds absurd to you. But for Russians it is completely normal.

[Editor's note: University of Houston professor Craig Pirrong has graciously contributed the attached blog entry to the RA blog. Craig maintains an excellent blog at www.streetwiseprofessor.com.]

Buyer Beware, Indeed
By Craig Pirrong

In a provocative article published last week in the Wall Street Journal, Alexander Temerko identifies the precise problem facing anyone foolhardy enough to invest in Russian equities, especially “strategic” sectors such as energy:

Unless you have your own private mole in government, you will never be able to predict your returns with any confidence. Directly or indirectly, corporate authority ultimately rests with the state in Russia.

The dominance of the state has two serious consequences.

First, the Russian state is notoriously opaque. This translates into corporate opacity for Russian companies. Insiders possess far superior information about the factors—notably the political factors and deals—that will affect a Russian company’s fortunes. Lacking “moles,” outside investors are at a severe information disadvantage relative to insiders and their favored tippees.

Severe informational asymmetry has a predictable effect—a pronounced lack of liquidity. Who wants to trade in a stock when there is a high likelihood that the party on the other side of the transaction has much better information? The laughably small daily trading turnover in an immense flotation such as Rosneft that Temerko notes is the inevitable consequence of the informational disparity between outsiders and insiders who face no sanction from trading on their superior information. Such stocks are the financial equivalent of Roach Motels—you can check in, but you can’t check out. Moreover, severe illiquidity can facilitate certain manipulative strategies that can result in mysterious stock price movements.

The second implication of state dominance is a severe separation of ownership and control, and a misalignment of the interests of formal owners and those effectively in control. The potential for diversion of corporate assets by the state’s creatures is extreme. As Temerko states, diversion of one company’s assets to support other politically favored companies is inevitable in these circumstances.

Furthermore, traditional investor protections from such conduct are completely lacking. Shareholder suits? Surely you jest. And corporate control transactions—such as hostile takeovers—that can sometimes discipline management in the US and Britain are unimaginable in “modern” Russia.

So why, pray tell, have investors plunged handsome sums into Russian equities? In some cases, notably Rosneft, investors have had to pay to play; Russia conditioned some companies’ ability to invest in Russian energy projects on their participation in the public offerings. This has proved cruelly ironic, as those that have “won” the right to invest in Russian projects have in fact won only the right to be fleeced a second time by having their capital expropriated on whatever pretext (environmental violations, failure to meet production targets) the Kremlin finds convenient (or perhaps just amusing). The only mildly surprising aspect of this is the extremely short interval that elapsed between the day some companies paid through the nose for an IPO and the time that the expropriation threat loomed large—a matter of mere months for BP, for instance. Vladimir Putin is indeed a man in a hurry, but that is a story for another day. In the meantime, would be investors, follow Mr. Tomerko’s advice: Beware!

In a world where ideology appears to have no meaning, the continuing and escalating tensions between the United States and Iran merit careful scrutiny. These two great countries are heading toward a showdown over the nuclear issue which will incomparably benefit opponents of both nations.

It is the United States that has accomplished a dream result for Iranian foreign policy. Every mullah in Iran should have a picture of Donald Rumsfeld on his desk, for the true great Satan who had tormented Iran for decades has been gracelessly removed by the United States. What Iranians fail to realize is that their newfound friend in Russia is actually up to its old imperial tricks. For Russian assistance on the nuclear installation represents the poison pill that will reduce the ability of Iran to project power in the Middle East and the Persian Gulf.

Rumsfeld, Hero to Iran, "The absence of evidence is not the evidence of absence."

A recent text called Confronting Iran by Ali M. Ansari points out that it is the neocons in both the United States and Iran that have pushed these countries to the precipice. There is no question that adding Iran to the axis of evil shortly after Mohammad Khatami’s tentative reaching out to the west was a diabolical mistake. Here Ansari examines the troubling information gap between foreign policy realism and neocon ideology which continues to characterize the dialogue on Iran in the United States:

“A network of politicians, propagandists, and journalists have all been complicit in the creation of a consensus that has suffocated debate and obstructed knowledge. This consensus is far more than a military-industrial complex. Those who seek to challenge the consensus are dismissed as irrational, even though they adhere to the Western tradition of knowledge more resolutely than the carriers of myth. Few statements have exemplified this trend more clearly than Donald Rumsfeld’s comment that 'the absence of evidence was not the evidence of absence.' By such standards, one must conclude that the Western enlightenment is over and we have entered a post-modern age in which belief and conviction tolerate no scrutiny.” (p. 238)

It is Europe and the United States whose thirst for energy could literally be satiated by an Iran whose infrastructure was redeveloped and whose massive resources were mobilized. Only Russia’s energy imperialism could be threatened by an Iran moving toward some type of rapprochement with the west.

The existential threat to Israel does not lie in Iranian bomb, but rather in an Israeli deployment against Iran of nuclear proportions that would only serve to further demonize both Israel and the United States (to Russia’s benefit).

It is not a coincidence that this nuclear play is going on at a time when Iran, the United States, and Israel are all caught up in massive questions concerning the competence of their leadership and the moral fiber of their elite.

Now is the time for leadership and creative intelligence, not confrontation.

[To our readers: As you know already, at the end of December of last year, ex-YUKOS head Mikhail Khodorkovsky and former MENATEP manager Platon Lebedev
were delivered to Chita at the behest of the procuracy-general of Russia. The investigative group headed by senior investigator for particularly important cases of the procuracy-general Salavat Karimov explained to their lawyers that Khodorkovsky and Lebedev are suspected of “legalization of monetary funds within the composition of an organized group”. By “legalization”, the procuracy-general has in mind “realization of stolen property – the crude oil of OAO «Tomskneft», OAO «Samarateftegas», OAO «Yuganskneftegas», receipt of proceeds and transfer thereof to the account of ROO «Open Russia» in the bank «Trust» on the basis of donation agreements”. The lawyers assume that the corresponding charges will be filed against Mikhail Khodorkovsky and Platon Lebedev on February 5.

Journalist Grigory Pasko has just returned from Chita, and offers our readers a series of exclusive reports on the city and why the power has chosen it for conducting “investigative actions”, filing new charges against the already convicted Lebedev and Khodorkovsky, and perhaps for conducting their next trial.]

Chita – A Little Island of the Soviet Union

By Grigory Pasko, journalist

The girl at the airline I’d never heard of assured me that the flight I had chosen to Chita was non-stop. So you can imagine my surprise – and not only mine, but that of many of my fellow passengers – when the plane landed in Bratsk and only took off again for Chita after two hours on the ground.

Local residents discuss the arrival of the plenipotentiary representative (Photo by Grigory Pasko)

In Chita, the arriving passengers were greeted by a severe frost – twenty below zero – and an incredible number of policemen lining the roads. There were so many that I couldn’t help thinking there must have been some incident taking place. It turned out that the city was being visited by the plenipotentiary representative of the president of Russia in the Siberian federal district, Anatoly Kvashnin. As I was told by local residents, the former general, who had distinguished himself in the Chechen “war”, had come to see how preparations were going in the region for the referendum on March 11 – on the question of the Anschluss of Chita Oblast with the Aginsky Buryat Autonomous Okrug. These same residents said that they couldn’t care less if the “merger” will take place or not. They honestly don’t understand who needs it and why. But they do know one thing for sure – the Evenks and the Buryats, the native peoples living in the Okrug, are against such a merger. But they are just a bit over ten thousand in number, these Evenks and Buryats, so who is going to listen to what they think? Kvashin even said as much: “The division of regions must take place not on the principle of nationality, but on the economic one”. And so it is that the unification is taking place – in the name of some kind of economic needs that nobody can understand.

Another surprise awaited me at what I had been told was the best hotel in Chita, the «Daurii». It turned out that the room I had booked two weeks earlier was already occupied by someone. The hotel manager explained: “You see, the plenipotentiary representative came, and brought a whole entourage with him… And then these other Muscovites came too, from Zurabov’s agency [the Ministry of Health and Social Issues—Trans.]… And so we gave them rooms. We’ve only got doubles left” [It is not considered unacceptable for total strangers to be forced to share a double room in a Russian hotel—Trans.]. I said that this all reminded me of the Soviet Union. “Yes”, the manager unexpectedly agreed with me. “Exactly. The Soviet Union”.

I decided to explore the city and hired a taxi. (At this time, plenipotentiary representative Kvashin was viewing a children’s polyclinic that didn’t have any medical equipment and a confectionery factory 50% of whose raw material inputs were imported. I learned all this in detail from a local television show). Almost immediately, right in the center of the city, I saw what is what was perhaps the only decent building in Chita – the Kazan Icon of the Mother of God Cathedral. The only other structure that was pleasant to look at was an “ice city” – which had been built by the Chinese.

Mother of God Cathedral - Chita (Photo by Grigory Pasko)

To be perfectly honest, I had expected to see a large, modern city, not a huge village of former exiles. Everything about the city reeked of the Soviet era and called attention to just how far away Chita is from civilization. Much farther than the 6 thousand kilometers from Moscow. By the way, I didn’t see any major construction going on, even thought the city’s coat of arms features eight sharpened posts of a stockade wall, characterizing precisely the construction arts.

Chita Coat of Arms

In reference books about Russia, Chita is invariably indicated as a “large Siberial cultural center”. The only cultural facilities I saw was the Chita Dramatic Theater and the city library. While I was in town, the Theater was playing Chekhov’s “Uncle Vanya”. The Oblast museum of local lore was featuring an exhibition on “The Saga of the Shumovs”. (In these days, local television was playing a clip about how the local administration of the FSB had invited Shumov’s relatives to come take a look at the building – the former mansion of the merchant Shumov, who exported Felix Dzerzhinsky’s “eagles” during the years of Soviet power [Dzerzhinsky was the founder of the NKVD, the first Soviet “secret police”, the precursor of today’s FSB—Trans.]. The mansion they’d forgotten to return to its rightful owners. And so now, sure, they showed the building to the relatives, but somehow never got around to actually returning it to them.

In a big store with the grandiose name «Trans-Baikal Crafts», virtually all the goods on sale were from either Moscow or St. Petersburg. Local articles included only a few paltry cups and saucers produced by a measly local factory and some kind of tacky ovesized sports medals.

The main local newspaper, «The Trans-Baikal Worker», was writing in those days about how the overall volume of capital investments in the first stage of the «Shipment of crude oil to China» investment project will comprise on the order of 13 billion rubles (around 500 million dollars). The project assumes an annual increase in the volume of shipments of oil products between the two countries. The lion’s share of these funds will go towards the reconstruction of the Trans-Baikal Railroad.

The paper also wrote that Platon Lebedev, who is currently in the SIZO [investigative isolator prison—Trans.] of Chita, had refused to participate in investigative actions and had demanded of the procurator-general that the latter open a criminal case with respect to several procuratorial workers.

A whole column in the newspaper was devoted to the activities of the Russian Defense Sportive-Technical Society (ROSTO), which, in the opinion of the author of the article, is “an important link in the process of rearing patriots of Russia”.

I asked my youthful taxi driver what young people do to make money here. He replied that there were almost no large enterprises left anywhere in the Oblast. The main employment is in the sphere of services and trade in imported goods. Many dream of leaving to live and work in Moscow and St. Petersburg. The local colleges have more places available than applicants. For many of the city’s inhabitants, the railroad is their “feeding trough”. (I didn’t quite understand how you can “feed” from it, but several days later, when I traveled from Chita to Vladivostok – by train – I understood that in the Far Eastern part of Russia, pretty much all human life lies huddled along the railroad tracks. The railroad provides work for law-abiding citizens, while criminals simply steal goods from the trains as they pass by).

What else do we know about Chita and its environs? Well, the entire Oblast is 431 thousand square kilometers in area (that’s 5 Austrias, or 4 Bulgarias, or 10 Switzerlands), it’s population is 1 million 200 thousand people (Austria alone has 8 million), and it is rich in non-ferrous and precious metals, coal, and iron ore…

Mosaic at the Chita railroad station (photo by Grigory Pasko)

One can judge to some extent about the standard of living from the prices for basic foods in Chita’s stores. A loaf of bread, for example, costs an average of 13 rubles (50 cents). A package of butter – from 15 to 30 rubes. A liter of milk – 30 rubles (a bit over a dollar). (For comparison, in Moscow, a liter of milk costs 20 rubles). It is interesting that as far as liquor goes, Chita shows a very strong preference for vodka: there is simply a huge quantity and great variety of vodka available.

The prices of certain products went up a bit in Chita after the New Year. Sugar, sausage, and milk got more expensive by two or three rubles. According to the locals, such price increases take place once every half-year.

In general, it seemed to me that the city of Chita is a typical Soviet city. A bit better or a bit worse than others in this or that way. I would venture to say that its only real distinction from many other Oblast capitals is the fact that it is very far from Moscow – 6 thousand kilometers. I think that they shipped Khodorkovsky and Lebedev here precisely because it is far from the center and from the central press journalists. And one more detail: only one of Chita’s hotels – and this one is located on the outskirts of the city – offers internet access.

Urgent Communication: Khodorkovsky and Lebedev Lawyers Detained by Police en Route to Chita

This evening in Moscow, lawyers of the defense teams for political prisoners Mikhail Khodorkovsky and Platon Lebedev, including lead lawyer Yuri Schmidt and Karinna Moskalenko, Yevgeny Baru, lead lawyer for Platon Lebedev, were detained by police at the airport on their way to Chita, taken to a station through a back door, and held for more than one hour without charges or explanation.

After much vigorous protest, a senior officer gave instructions for the release of the male prisoners, who were being held in one cell. At this time, the whereabouts of Karinna Moskalenko are still unknown.

In response to these warrant-less and unwarranted arrests, international defense counsel Robert Amsterdam issued the following comments:

“It is clear that the games have begun once again,” said Mr. Amsterdam. “The constant harassment of the legal team – which has included interception of communications, physical intimidation, disbarment, imprisonment, and deportation – apparently will continue as we prepare to defend our client from new, fraudulent charges. One can only continue to condemn these ongoing attacks as a further abuse of process which renders hollow any assertions by the Russian president about the 'dictatorship of law.' It’s just dictatorship.”

From the FT:

Khodorkovsky set to face fresh charges

By Catherine Belton in Moscow

Published: February 4 2007 23:04

Russian prosecutors are due to press charges on Monday against jailed Yukos founder Mikhail Khodorkovsky, his lawyers said.

The new charges are expected to centre on accusations of large-scale embezzlement and money laundering, quashing any chance of parole this year and potentially increasing his eight-year prison sentence.

They come as the Russian government prepares to begin a bankruptcy sale of Yukos, once Russia’s biggest oil company.

Mr Khodorkovsky’s lawyers said the additional charges seemed aimed at legitimising the sell-off, which Mr Khodorkovsky’s defence team have branded as “theft”.

“They want to give legitimacy to the future auction,” said Robert Amsterdam, a member of Mr Khodorkovsky’s international defence team. “They think if they keep hitting Khodorkovsky something will stick.”

The charges could also be politically motivated. Mr Khodorkovsky is eligible for parole this year because he would have served half his jail term since his arrest in 2003. That raises potential political risks for President Vladimir Putin in a crucial pre-election year

Money-laundering charges could lead to attempts to block funds prosecutors believe could be held by Mr Khodorkovsky’s team in accounts abroad, lawyers said.

“They think Khodorkovsky has $10bn [£5bn] stashed away abroad,” said Pavel Ivlev, a former lawyer for Yukos. “They think he could use this cash to fund the opposition in an election year. They are trying to find it and want at least to block it.”

The new charges come 18 months after Mr Khodorkovsky and his business partner, Platon Lebedev, were sent to Siberian prison camps after being found guilty of fraud in a case criticised as being politically motivated.

Mr Lebedev’s lawyer, Yelena Liptser, said prosecutors had informed her that charges would be pressed against him too.

Yury Shmidt, Mr Khodorkovsky’s lawyer, said police detained him and a team of four other defence lawyers for about an hour on Sunday evening as they left Moscow for the east Siberian city of Chita, where they say prosecutors are due to present a formal indictment in court on Monday.

Mr Shmidt said that prosecutors could yet postpone handing down the indictment and had not made clear the exact charges.

When Mr Khodorkovsky and Mr Lebedev were transferred to Chita in December for questioning, prosecutors said they were preparing to press money-laundering charges, which carry a sentence of 10 to 15 years.

Mr Khodorkovsky’s def­ence team said they were expecting the charges to centre on criminal cases already pursued against other Yukos employees: the embezzlement of $13bn in Yukos crude sales since 2001 through two trading companies registered in the west Russian region of Mordovia, and the subsequent laundering of the proceeds.

Charges relating to an embezzlement case over transfers of shares of Eastern Oil Company, or VNK, could be pressed too. Lawyers say the accusations in both cases were “absurd”.

From Interfax:

Prosecutor general brings new charges against Khodorkovsky - lawyer

MOSCOW. Feb 5 (Interfax) - The Russian Prosecutor General's Office has brought new money-laundering charges against former head of the Yukos company Mikhail Khodorkovsky, Karina Moskalenko, a lawyer for Khodorkovsky, said.

New charges were brought in the office of the Chita region prosecutor on Monday.

Khodorkovsky and former head of Menatep Platon Lebedev were convoyed to Chita in mid-December 2006 from the penal colony where they had been serving their terms.

[the attached post was written by the editor of this blog, introducing RA's newest guest blogger, The Polittechnologist]

One of the more sinister developments to come out of Vladimir Putin’s Russia recently is the concept of “political technology”. Political technologists have become one of the hottest and fastest growing new professions in Russia. More than mere spin doctors or propagandists, political technologists use every means at their disposal – fair or foul, no holds barred – to achieve the political results demanded by their political masters. Do you want to guarantee your party a 20% margin of victory in a local by-election even though it has never won in the district before? Hire a political technologist. Need to convince the country that an inconveniently popular political opponent is secretly a cross-dressing child molester? Hire a political technologist. Have to convince an impoverished populace that life is getting better by the day? Hire a political technologist. Don’t know how to transform a faceless former secret policeman into a sexy, charming, resolute, eagle-eyed and steel-jawed Leader fearlessly guiding the nation into the future from the prow of a submarine? You get the idea…

We interviewed a Russian political technologist (polittechnologist) – anonymously, of course – to get his insights on the perplexing behavior of the Russian authorities in baselessly detaining four lawyers representing Mikhail Khodorkovsky and Platon Lebedev as they were checking in for a flight to meet with their clients in faraway Chita. Our source had no problem coming up with a long list of possible motives without even giving the question any thought. In the context of today’s Russia – a place of lawlessness, cynicism, and impunity in the mercenary pursuit of political goals – it all seems perfectly logical.

At the most obvious level, our political technologist believes that the detention served to unnerve the lawyers and remind everybody who’s the boss. The authorities wield enforcement power, which they can – and do – use whenever it suits them. And don’t use whenever this might be inconvenient or embarrassing. Another obvious benefit from detaining the lawyers was to have an opportunity to ransack and photocopy the contents of their briefcases at leisure – briefcases that contained confidential case-related documents ordinarily protected by the sanctity of attorney-client privilege. This incident occurred on the eve of the filing of new charges against Khodorkovsky and Lebedev. It is obvious that a foreknowledge of how the defense intended to react to the charges would be of immense strategic advantage to the prosecution, which is not accustomed to dealing with its adversaries on a level playing field.

One extremely curious fact about the incident, which did not escape the notice of our political technologist, was that the police allowed the lawyers to keep and use their mobile telephones while they were locked up in the mini-jail at the airport. In Russia, nothing like this happens by accident – it was obviously an intentional “oversight”, and the authorities wanted the lawyers to cause a furor. But to what possible purpose? This is where political technology diverges from political science in the same way that science fiction differs from ordinary fiction. Anything is possible in a land without rule of law; the only constraint is the imagination, and political technologists certainly don’t lack for imagination.

According to our political technologist, the detentions were probably a “dry run” rehearsal of sorts, a “bench test” on a small scale in a safe and controlled environment, where there wouldn’t be any major repercussions if anything went wrong. Better to make mistakes now and have a chance to correct them than to fall flat on one’s face during some really important stage of the game. The power doesn’t like to look weak.

So, what could they have been “testing”? Take your pick – in Russia’s culture of secrecy, nobody will ever know for sure:

• Do the police respond quickly and efficiently to a political order that comes down from above?
• Who are the first people the defense phones in a crisis? (Answer: human rights groups and the domestic and international press, all of whom immediately spread the news worldwide. By allowing the lawyers to make these phone calls during an insignificant incident, the authorities have now learned their “political technology” paradigm.)
• Do they phone anyone in government – is there anybody still left in the halls of power whom they might still consider sympathetic to their cause? (If so, such people are clearly potential enemies and need to be removed from their posts.)
• How does the press respond to such an event? Is the case still newsworthy? (Answer: thankfully for us, yes!)
• Which “press organs” give the story the quickest and deepest and most objective coverage? (These are clearly a threat that needs to be neutralized.)
• In what ways is the true story distorted by the time it hits the headlines? (Useful knowledge if you want to use the “press organs” you control to help “shape” reality for public consumption.)

And, of course, if you keep doing outrageous things like this, they eventually stop being outrageous in the public consciousness, and become “normal”. So that when one day you need to illegally arrest someone really important to you, nobody will care or notice any more.

As a final thought, our source adds that the campaign against Mikhail Khodorkovsky is vitally important to highly placed Kremlin officials. They and their political technologists have thought it through down to the last detail, and can’t afford for something to go wrong at a critical juncture. They have identified every risk they can foresee, but you can never foresee everything. A “dry run”, like a fire drill, is an opportunity for the political technologists to test out all the systems they’ve put in place and see if you’ve missed anything critical, such as unforeseen technical glitches or enemies lurking in the shadows. Can’t have that, can we?

Land of exiles and convicts

By Grigory Pasko, journalist
REPORTING FROM CHITA, SIBERIA

“Dismal marshy bogs” is how one guidebook describes the natural landscape around Chita. I got to see some of these bogs when I travelled a bit beyond the city boundary, in the direction of Darasun. It was morning, and it was freezing outside – you could feel the cold right down to your bones. So there was no desire whatsoever to step out of the taxi if it wasn’t absolutely necessary. It is known that the climate in these parts is what is known as “severely continental” – winters are sunny, dry, and very cold. The average temperature in January is 30 below zero Celsius. And the summers are very brief and not very warm.

A "dismal marshy bog" in Chita (Photo by Grigory Pasko)

I had another chance to see these “marshy bogs” through the window of the «Moskva-Vladivostok» train. But I’m getting ahead of myself here; let’s get back to Chita for now. In the book “Siberia and the Exile System” (1885-1886), the American explorer George Kennan writes the following about Chita: “…A large provincial city spread out in a haphazard way, with a population of around four thousand residents. This is a famous city in the history of the exile system. Between the years 1825 and 1827, the majority of those brave young noblemen who had unsuccessfully attempted to overthrow the Russian autocracy and establish a constitutional form of government were banished here.”

The Russian authorities continue to use Chita as a place of banishment to this day. And although there are only a dozen or so places here for the punishment of those deprived of liberty, the conditions of detention of prisoners largely remain severe, which even correctional system workers will admit. Within the administration of the federal service for the execution of punishments (UFSIN) of Chita Oblast are: an investigative isolator in Chita (where Platon Lebedev and Mikhail Khodorkovsky are currently being held), a colony-settlement, 2 general regime correctional institutions (including the one in Krasnokamensk, where Khodorkovsky was serving his sentence until this past December), 3 strict regime correctional institutions, an oblast hospital and “facility functioning in the regime of an investigative isolator” and 2 special regime correctional institutions, a therapeutic-correctional institution for tuberculosis patients and an educational colony [juvenile detention facility—Trans.]

The penal colonies are situated in the same places where the hard labor penal servitude prisons were located in tsarist times: Karymsky Rayon, Nerchinsk, the Oginsky Tract...

Here is what Kennan wrote about the Kariysky penal mining camps of the Trans-Baikal region:

“...The most prevalent illnesses are scurvy, spotted fever, typhus, anemia, and consumption. The greater part of these illnesses are the direct result of the fact that the arrestees are constrained to live in dirty and overcrowded cells”.

(It is noteworthy that they haven’t been able to get rid of consumption – which we now call tuberculosis – in these places for over a hundred years). According to George Kennan’s testimony and calculations, the state spent less than half a dollar a day – 37 cents – on maintaining the hard labor prisoners. Today – 120 years later – the state is spending a bit over 80 cents a day – 22 rubles – per prisoner. And the purchasing power of money back then was much higher than today.

In the times of the tsars in Russia, politically unreliable citizens were hastily tried and sentenced by military courts and then sent away to the far corners of Siberia and the Trans-Baikal region for katorga – penal servitude at hard labor, which included being deprived of all civil rights. The Times of London wrote in 1880: “Western observers do not see anything in these trials besides a disgraceful parody of justice...”

I still remember the following story told by an American journalist in his book about Siberia and the exiles: Maria Kovalevskaya, daughter of the landowner Vorontsov, was sentenced in 1879 as a revolutionary to 13 years of katorga labor followed by lifelong exile in Siberia. Her husband was sent to Minusinsk, while their young daughter Galya remained in Kiev in the care of Kovalevskaya’s sister. Kovalevskaya ultimately lost her mind. Kennan cites an excerpt from a letter written by daughter Galya to her mother in the Trans-Baikal region: “My dearest, beloved mommy! How I wish that you could see what wonderful weather we’re having here… I’m doing well in school. I have an A in history, an A in grammar, but there is also sad news. I could not solve an arithmetic problem and got a C…”

Kennan writes that at this time Kovalevskaya was in the Kariysky mines, her health shattered, with no hope of ever returning to European Russia and even without hope of surviving her 13 years in the Trans-Baikal mines. “I often thought”, wrote Kennan, “about what an abyss lies between what a child calls ‘sad news’ and the horrible tragedy in the life of her mother… If you can imagine Kovalevskaya in the Kariysky mines, separated forever from her only child and together with this getting such letters, you will perhaps understand what it was that she lost her mind from in the end”.

A typical village in the Chita area (photo by Grigory Pasko)

It so happens that I am somewhat acquainted with the family of a political prisoner of contemporary Russia, Igor Sutyagin, who was sentenced to 15 years of deprivation of liberty supposedly for espionage for parties that were not established by the court and the investigation (a “disgraceful parody of justice”, as Kennan wrote). Igor’s two daughters essentially grew up without him.

I don’t know what Mikhail Khodorkovsky’s children write in their letters to their father. His daughter Nastya recalls that during her visit with her father, she at first didn’t even believe that she was finally seeing him. What can I say? It’s a good thing that 120 years after tsarism, the children of exiles in Russia have the opportunity to meet with their parents at least sometimes.

As I recall Kennan’s “Siberia and the Exile System”, I can’t help but remember an episode associated with the great Russian writer, count Leo Tolstoy. Kennan describes an incident when he met with Tolstoy:

“However, he did not find the inclination to hear out reports about the sufferings of political hard labor prisoners in Eastern Siberia… and let me know clearly that even though he does have pity for many politicals, he can not help them in any way and furthermore does not approve of their methods”.

It is known that many of Khodorkovsky’s contemporaries have rushed to declare the rectitude of the decision of the court to convict him (recall the famous “letter of the fifty”, when leading Russian cultural and political figures spoke out in support of Khodorkovsky’s conviction). Of course, none of the people who signed this letter could hold a candle to count Leo Tolstoy. But to see the return of this readiness to score points with the power at any cost, at a time when it would seem that the grovelling of the Soviet people before the Soviet Party bosses had finally and irrevocably disappeared, can not but be depressing.

Dear Readers,

If you have seen the news today, I'm sure you understand that we are having a very busy day.

These new charges mean that the Russian procuracy is effectively looking for a life sentence for my client, Mikhail Khodorkovsky. They want to take a man with immense gifts and who was largely responsible for some of the most important innovations in the oil fields of Siberia and imprison him during his most productive years.

They desire to do this not to seek justice, but to thwart it, not for the good of the country, but for themselves. Acting outside of the law in a manner that is both cynical and transparent, we begin yet another chapter in this new and somewhat insane dictatorship of law, which is no law and all dictatorship.

We must tonight think not only of Khodorkovsky, but of Russia, and what it means that people of such limited vision have been given such immense power.

I have just spoken with Mikhail Khodorkovsky's chief counsel in Russia, Yuri Schmidt, by telephone from Chita. Schmidt had arrived in Chita on Monday morning, after an overnight flight from Moscow which he almost didn't make because the police had detained him and his colleagues on no grounds whatsoever while they were checking in for their flight and then held them locked up in the airport jail without charges for over an hour.

After such an ordeal, Schmidt had a full day of work ahead of him in Chita, as Khodorkovsky and Platon Lebedev had charges formally filed against them on Monday. Schmidt reports that the city of Chita, normally a sleepy backwater, feels like an armed camp. There are police on every corner, and when Khodorkovsky and Lebedev were transported from the jail to the procuracy for the reading of the indictment, all traffic was cleared from their route - in exactly the same way as is done for the president.

Khodorkovsky and Lebedev themselves are being guarded by a phalanx of OMON troops wearing crash helmets and balaclava ski masks and armed with machine guns. These troops have been brought in from elsewhere in Russia, and do not answer to the local authorities. Schmidt, who has worked as a lawyer since Soviet times and thought he had seen it all, says that he has never encountered the kind of draconian security procedures that are in place at the Chita SIZO isolator prison where his client is being held. To visit Khodorkovsky, he has to undergo a full search of all his belongings and pass through thirty locked doors and gates.

Commenting on the actual charges, Schmidt feels that the procurators who drew them up must not have even paused for a moment to think about the ludicrous numbers they were writing down. Khodorkovsky is charged with having embezzled and laundered a staggering $25 billion - more than the entire market capitalization of YUKOS at the time the alleged theft took place! In Khodorkovsky's words, this "isn't absurd - it's insane".

Finally, Schmidt reports that it has been announced that the actual trial will take place inside the Chita isolator prison. Even if we ignore the fact that by law it should be taking place in Moscow, the very idea of holding it inside the walls of this high-security facility means that even if the trial is formally declared to be "open", in fact nobody - except those the power chooses - will be allowed to attend because they will not be able to obtain security clearance from the prison authorities.

- Robert Amsterdam

The Chita SIZO

By Grigory Pasko, journalist
REPORTING FROM CHITA

While in Chita, I made it a point to buy the local newspapers every day. I noticed that there were no more than five of them published in the city. By comparison, there are over 20 in Vladivostok. I also looked through old copies of the local papers, but rarely did I find in them reports about how the prisoners Platon Lebedev and Mikhail Khodorkovsky are being held in Chita, in the investigative isolator. I asked many Chitans what they thought about these people. The majority said: we don’t care whether they’re in jail or not and what the power is doing with them. Many spoke thus: the power is dividing up property, and that is why it locked up Khodorkovsky, having taken this property away from him. Still others added: Putin is never going to release Khodorkovsky until he himself falls from power.

It is known that Lebedev and Khodorkovsky were moved from the places of confinement where they had been to Chita for the conducting of some kind of mysterious investigative actions. But why to Chita of all places? Probably because it is more convenient to accomplish the perverted justice of today’s power far away from Moscow. And also: journalists are not going to come to Chita en masse, nor will foreign observers. In the event that the prisoners are bruised and battered, you can always write it off to the wild manners of the descendants of the Trans-Baikal hard labor katorga prisoner-exiles of old (which has already happened with Khodorkovsky in the Krasnokamensk prison colony).

It goes without saying that I decided to get as close as I could to the Chita SIZO [investigative isolator prison—Trans.]. I recalled that in December of last year, an ITAR-TASS photojournalist had been detained near the SIZO for attempting to photograph the building. They demanded that he destroy the photos he had made. He had no choice but to submit to the demands of the SIZO employees. The last thing I wanted was to have to deal with people who don’t known the law on the mass media or that there is not and can not be a prohibition on photographing any building. But I nevertheless decided to photograph the “prohibited” structure. I won’t tell you exactly how I did it, but I succeeded. The SIZO of Chita is the same as hundreds of others throughout all of Russia. A standard brick building, faceless and dull in its architecture.

SIZO-1 isolator – Chita (Photo taken at great personal risk by Grigory Pasko)

On November 30, 2005, at a roundtable session on questions of the application of the European Convention for the Protection of Human Rights and Fundamental Freedoms, the governor of Chita Oblast, Ravil Geniatulin, declared that the Chita temporary holding isolator does not meet modern requirements and that the construction of a new wing is taking place. In January 2007, the new security wing no. 3, capable of holding 330 suspects, accuseds, and convicts, was finally put into operation. As reported on the Chita SIZO’s website, the floorspace norm per person is “maximally proximated to established state standards”. It is difficult to say what this flowery phrase actually means if we consider that the norm per person is 4 meters. “Maximally proximated to state standards” could just as easily mean two meters, or three…

By the way, Khodorkovsky and Lebedev are currently being held in this new wing of the SIZO. According to their lawyers, they are being guarded by spetsnaz troops specially brought in from elsewhere for the purpose. These troops are not under the SIZO’s chain of command, and do not take their orders from the SIZO chief. Under the pretext of providing security for the procuracy-general’s investigative group working in Chita, more than 150 MVD special unit (spetsnaz) troops were pulled into the city from Irkutsk Oblast and the Republic of Buryatia at the end of January. In the word’s of Platon Lebedev’s lawyer Elena Liptser, there were fighters “in masks and with weaponry” present when investigators met with Mikhail Khodorkovsky and Platon Lebedev in the Oblast procuracy. It is obvious that this is being done to intimidate the convicts and to lend the “YUKOS case” an aura of super-importance and to show how seriously the state is taking its responsibility. And indeed, you can’t expect the power to admit that it fears being unmasked, that it fears the people actually might learn about the crime it has perpetrated with respect to people it knows are innocent.

Another thing Elena Liptser told me was how the lawyers are searched before they are permitted to meet with their clients: everything is dumped out of their bags, right on down to lipstick. In order to get to Lebedev and Khodorkovsky, the lawyers have to pass through around thirty locked doors and barred gates.

As of December 2006, SIZO-1 of the city of Chita held around 2000 suspects, accuseds, and convicts, which is three times more than the established limit of places. In order to change the situation, the Chita Oblast Administration of the Federal Service for the Execution of Punishments leadership adopted a decision about the organization of a SIZO-2 in the city of Krasnokamensk, as well as “facilities functioning in the regime of an investigative isolator” in 4 correctional colonies of Chita Oblast.

To this should be added that in the past few years of Vladimir Putin’s rule, the number of prisoners in Russia has been constantly on the increase. Thus, if in 2003 the number of persons in places of deprivation of liberty was 847 thousand, then as of January 2007 there are more than 872 thousand of them.

We know that new charges were filed against Khodorkovsky and Lebedev on February 5. This means that they can expect to spend a long time yet in the Chita SIZO. There are grounds to assume that the upcoming court sessions with respect to the new criminal case will also take place in Chita. In fact, it has already been announced that the trial itself will take place inside the isolator – an unprecedented move clearly designed to ensure that a nominally “open” trial will in fact be closed to the public, which will not be able to gain access into the high security facility.

An article which we assume will be appearing in tomorrow's edition of the New York Times:

New Charges Against Imprisoned Yukos Founder

By C.J. CHIVERS
Published: February 5, 2007

MOSCOW, Feb. 5 — Russian prosecutors brought new charges today against the imprisoned founder of the Yukos oil company and one of his business partners, opening a new line of legal attack against a Kremlin foe who was once regarded as Russia’s richest man.

The former executive, Mikhail B. Khodorkovsky, and his partner, Platon A. Lebedev, were each charged today with embezzlement and money laundering. Mr. Khodorkovsky’s lawyers said the new charges carry maximum prison sentences of 15 years.

The two men were arrested in 2003 and have been held since then. The original charges involved tax evasion and related crimes; they were convicted and sentenced to eight years in prison. According to their lawyers, the men could have qualified for parole late this year, when they would have completed half their terms.

But the new charges appear to destroy any chance of that, and to open a new chapter in the long saga of Yukos’s legal troubles.

The new charges — accusing the men of embezzling $20 billion in company revenue — were filed today under intense security but with little fanfare in the eastern Siberian city of Chita. Mr. Khodorkovsky and Mr. Lebedev were transferred to Chita in December from the separate penal colonies where they have been serving their sentences.

Russian prosecutors said little about the matter today, and did not publicly release either the charges or any supporting documents. Essential details remained unknown, even to the defense lawyers, including the dates of the alleged embezzlements and the specific amounts involved.

Defense lawyers immediately denounced the new charges as baseless. They said the charges were meant simply to keep Mr. Khodorkovsky and Mr. Lebedev in prison until after the Russian presidential election in early 2008, and until after Yukos, their former giant oil com