Photograph Source: Daniel X. O’Neil – CC BY 2.0
From a prison cell in Moscow, in an opinion piece in The Washington Post where he is a Global Opinions contributor, Vladimir Kara-Murza, a Russian politician, recently (6/21/23) exhorted the West not to negotiate a peace agreement with Putin because this will only strengthen him. “The West deserves much of the blame for Putin’s rise to unchecked power,” he says. Don’t do it again, he warns.
How is the West partly responsible for the rise of Putin? Kara-Murza reminds us of Putin’s greatest attacks on democracy during the first three years of his presidency and points out that they were all ignored by Western leaders. Presidents G.W. Bush and Obama praised him, and in 2003, the year in which the last independent station in Russia, TVS, went off the air, the British prime minister treated him to a lavish state dinner.
But what emerges from Karr-Murza’s account is far more complicated. Kara-Murza’s list of Putin’s crimes is a reminder of what an unjust economic and legal system Putin inherited from his predecessor Boris Yeltsin, a system that was created according to a US government plan.
The anti-democratic actions that Kara-Murza singles out, all of which occurred between 2000 and 2003, are these:
–TV channels NTV, TV-6 and finally TVS, fall silent
–Mikhail Khodorkovsky, a funder of civil society groups and opposition parties who confronted Putin publicly, is arrested on trumped up charges
–Russia’s parliamentary elections — for the first time since the end of Soviet rule — is assessed by international observers as “unfair.”
The arrest of Khodorkovsky is second on Kara-Murza’s list, but it is useful to deal with it first. Although you would not know it from his Washington Post byline, Kara-Murza is the vice chairman of the political organization Open Russia, which was founded to advocate for democracy and human rights and is funded by…Khodorkovsky. (Its board once included Henry Kissinger.)
Before Russia’s 1996 presidential elections it appeared that Yeltsin would lose to the candidate of the Communist party. Workers believed that they had been cheated by Yeltsin’s privatization program, while bankers were invited to rob the government. For the workers it worked like this: The government distributed to all Russian families privatization vouchers for some 15,000 government-owned firms (though the largest firms, including gas, oil and metals, were not part of this program.) Some workers did not know the (present) values of the earnings of these companies while others could not afford to wait until the prices of the vouchers reflected these values. Although the workers sold these vouchers freely, they felt they had been taken advantage of. For the bankers, it worked like this: Each governmental department deposited its allotment of tax revenues in one of Russia’s private banks, paying the banks’ management fees and collecting little or no interest on their deposits. The banks, on the other hand, earned between 20%-30% real interest on the loans that they were making. Pyotr Aven, the head of Alfa Bank explained:
To become a millionaire in our country it is not at all necessary to have a good head or specialized knowledge. Often it is enough to have active support in the government, the parliament, local power structures and law enforcement agencies. One fine day your insignificant bank is authorized, for instance, to conduct operations with budgetary funds. Or quotas are generously allotted . . . for the export of oil, timber, and gas. In other words, you are appointed a millionaire.
And Khodorkovsky? His bank got the government’s funds to finance the war against Chechnya.
Not surprisingly, President Yeltsin’s approval numbers fell to single digits while the Communists were gaining strength. If the Communists won, the new oligarchs would lose their loot. In Davos, Vladimir Gusinsky, the owner of both MOST bank and NTV, organized his fellow bankers and media owners, among them Boris Berezovsky, the owner of TV-6 and Channel 1 (51% public, but Berezovsky was given control of it), to protect their golden goose and increase their loot at the same time.
The plan, concocted in Davos, was this: The billionaires would finance Yeltsin’s election campaign and their TV stations, including the formerly critical NTV, would line up behind him. This would leave Yeltsin as the only candidate with the money and media support needed to run. The moguls’ biggest fear was that their money would be clawed back by the Communists. Yeltsin’s win in itself would have been a handsome return on investment; but they wanted, and would receive, much more. Vladimir Potanin, the owner of Oneksimbank, together with Anatoly Chubais, the vice premier in charge of economic policy, invented a “loan-for-shares” scheme: Each of the moguls would lend money to the government and the government would place its most valuable public assets, such as oil and raw metals, as collateral. The government would default on the loans, and the moguls would become the new owners of these assets. Officially, the assets were auctioned off to the highest bidders. But the winner of each auction, and the price of his winning bid (a tiny fraction of the true value of the asset), had been pre-arranged; no firm that was not part of the “Davos pact” was allowed to participate.
And Khodorkovsky? He “won” Russia’s oil.
Khodorkovsky stands out even among the kleptocrats. All of them stole from the Russian people as a whole—but he also robbed those Russians who were directly connected to his oil company, Yukos. Workers were cheated out of their wages. Minority shareholders and the tax authorities were fleeced twice: once by reporting far lower prices for the oil Yukos sold than the actual price it collected, and then again by issuing new shares that Yukos sold to offshore companies for pennies on the dollar.
There are suspicions, but no proof, that Khodorkovsky was involved, but criticizing his company was dangerous, and could even prove fatal. According to Stanford, Harvard and University of Maryland economists who were involved in the privatization of Russia, “[t]he mayor of Nefteyugansk was murdered in June 1998, several weeks after publicly demanding that Yuganksneftegaz (one of Yukos’ main subsidiaries) pay its taxes and back wages. In March 1999, the head of another oil company who had won a high-profile lawsuit against Yukos, had his car blown up near his home, with armed attackers waiting to finish off anyone who survived the bomb. By chance, he wasn’t inside, but his bodyguards were less fortunate.”
What does this have to do with the West? Everything. The claim that what Russia needed after the end of Communism was rapid privatization was developed and promoted by economists at Harvard University who were hired by the U.S. Agency for International Development (USAID) to assist Russia. The economist Andrei Shleifer was a personal consultant to Chubais. (True to his advice that Chubais promote private interests, Shleifer lined his own pockets – and Harvard backed him up.)
The other items on Kara-Murza’s list — the end of TVS and the parliamentary elections of 2003 — are also important to understand. TVS closed because it had low ratings and could not pay the salaries of its workers. As for the elections, the Organization for Security and Co-operation in Europe which monitored it, concluded: “The Central Election Commission deserves credit for its professional organization of these elections. However, the pre-election process was characterized by extensive use of the state apparatus and media favoritism to benefit the largest pro-presidential party, reflected in voter apathy.”
Everyone would agree that a ruling party should not be able to use public TV stations to promote itself. But as the elections of 1996 made clear (and as we know from our own experience), the answer is not private TV stations. What is needed is a law that requires public funding of elections and non-partisan coverage by all TV channels, whether public or private. Even if the law were not applied perfectly, the bias could not be as great as it was when the private TV stations were permitted to serve the self-interest of their owners –unchecked.
Until the war with Russia, Ukraine escaped the clutches of the anti-worker and pro-privatization economists. But it’s been impossible for workers to defend themselves while being on the front line. This time the economic gurus are not from the US but from Cambridge, England. Liz Shuler, the president of the AFL-CIO, was among those who raised the alarm against a long list of anti-worker laws that Ukraine adopted in 2022. These laws ban unions in firms that employ fewer than 250 workers—75% of the labor force, confiscate the property of unions, eliminate the protection of the right to organize, and weaken safety and health protection. The list goes on and on. It’s bad enough to be living through a war; Ukrainian workers shouldn’t also have to lose their right to unionize, labor protections and and the industries they own.
The West has already done enough damage to Russian and Ukrainian workers. The least it can do now is push for a negotiated settlement of the war with the Ukraine and stop interfering in Russia’s and Ukraine’s political and economic lives. American media has a responsibility to understand and report on the complexities fully.
