Khodorkovsky Has Some Advice as Stocks Tumble

APKhodorkovsky, pictured at his parole hearing last month, says Medvedev had little choice but to invade Georgia.
Read the Khodorkovsky interview.

As investors fret amid a global economic downturn, the government needs to be forthcoming about its actions in order to boost confidence in the Russian market, jailed businessman Mikhail Khodorkovsky told The Moscow Times.

Khodorkovsky also offered rare praise for President Dmitry Medvedev, saying he had acted appropriately on Georgia, and expressed hope that new presidencies in Russia and the United States would lead to improved relations.

The Russian economy has bled billions of dollars since the Kremlin startled investors by sending troops into Georgia to fight a brief war last month. Foreign investment fell by $20 billion in August, according to some estimates, while the stock market has lost billions of dollars more -- events Khodorkovsky has been closely following in the dozens of publications he receives in his prison cell in the Chita region.

"Investors worry most about uncertainty," Khodorkovsky said in a five-page written response to questions submitted through his lawyers.

"From my own experience, I know that people will make the worst assumptions if you fail to explain what is happening. That is why restoring trust has to begin with regular, detailed explanations of [the government's] position," he said.

Khodorkovsky said the government is taking a step in this direction but needs to go further by announcing pending rules and explaining its actions based on those rules.

A third step, he said, would be to "consolidating these rules on an institutional basis, which is the guarantee of their stability."

"Any other kind of market is open season for adventurers and crooks, which is absolutely not in Russia's interests," he said.

Turning to Georgia, Khodorkovsky said Medvedev had little choice but to invade after Georgian President Mikheil Saakashvili tried to retake the breakaway region of South Ossetia by force on Aug. 8. Khodorkovsky also backed Medvedev's decision on Aug. 26 to recognize the independence of South Ossetia and another breakaway region, Abkhazia.

"It's evident that Saakashvili, counting on the support of the West, decided to launch a military venture without the sanction of the United States and overestimated the chances of gaining backing," he said.

"It's important to understand that President [Dmitry] Medvedev had no other choice given situations on Aug. 8 and Aug. 26."

Khodorkovsky previously has been reserved in his comments about Medvedev, and his lawyers earlier this year voiced hope that Medvedev's assent to the Kremlin would help facilitate the early release of their client. Khodorkovsky's supporters accuse former President Vladimir Putin of orchestrating his eight-year imprisonment on fraud and tax charges and the state's takeover of his Yukos oil company in retaliation for his business and political ambitions.

Medvedev has indicated that he would not get involved, saying the case has to remain within the framework of the law.

A Chita court denied parole to Khodorkovsky last month, and his lawyers have appealed.

With Medvedev cementing his power in the Kremlin and Americans voting for a new president in November, there is an opportunity to salvage relations that have sunk to post-Cold War lows after the Georgia conflict, Khodorkovsky said.

"The coming change of presidential administration in the United States and the gradual building of the team holding power in Russia offer a great chance at a fresh start," said Khodorkovsky, once a regular guest at events at the U.S. ambassador's Spaso House residence in Moscow.

"I very much hope that we will not cast each other in the role of Evil Empire," he said.

On domestic issues, Khodorkovsky criticized a government drive to develop innovative technologies as insufficient and said foreign money investment alone would not solve the country's problems.

"I think that money is not the most important thing for Russia today -- there is more than enough of it," he said. "What is important is knowledge, markets and cooperation."

In his more than five years in prison, he has worked out his own economic and social development plan for Russian through 2020.

Another issue Khodorkovsky criticized was inflation, which might reach 12.5 percent this year despite government attempts to tame it, including by freezing prices for staples like bread and milk for several months.

"I am convinced that monetary methods alone are insufficient to fight inflation," Khodorkovsky said. "The stress should now be put on increasing labor productivity by improving the quality of management and broadening the use of the modern technologies."

At the August parole hearing, Khodorkovsky said he would leave business for good and devote his life to humanitarian work and his family if he was released. In the written response to questions, though, he still showed an interest in developments in the oil industry, which has faced difficulties as crude output began to fall.

He said Russia could steadily produce 10 million barrels a day and called the decline to 9.82 million barrels in August artificial. The drop was 0.9 percent year on year. This year has seen the first oil output decline since 1998.

"Back in 2002, at a meeting on energy policy, I suggested that we should aim at a production level of 10 million barrels per day (for land-based drilling) and stick to this level for 15-20 years," Khodorkovsky said.

With that, he called for the development of renewable resources. "I think $70 a barrel, considering the current dollar level, is the price at which modern technologies enable us to gradually replace hydrocarbons with other energy sources," he said. "But the decision is a political one, as every startup energy project in the history of modern civilization has required major investment."