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. Last Updated: 07/27/2016

The President and the Oligarch

"Mr. President, your bureaucracy is made up of bribe-takers and thieves."
"Mr. Oligarch, would you like me to remind you how you acquired your fortune?"

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This, in a nutshell, was the historical exchange that took place between two of our most eminent contemporaries at a February meeting between President Vladimir Putin and leading businessmen from the RSPP.

The tragedy is that they are both right. The bureaucracy is indeed made up of bribe-takers and thieves, and Mikhail Khodorkovsky produced several cogent examples to support his thesis. However, the very same Khodorkovsky is one of those who, during the turbulent years of primative capital accumulation, was appointed a member of the super-rich business elite by the Russian bureaucracy. Boris Berezovsky, in his letter from afar to the editors of Kommersant, described with disarming candor how: "In those years, anyone who was not lazy could get huge chunks of state property by giving minor bribes to officials."

An oligarch is not simply a very rich person. Bill Gates is the richest person in the world, but no one would call him an oligarch. Oligarchy is the binary relationship between business and the authorities. Oligarchic capitalism ? la russe is when major businessmen can function and multiply their fortunes exclusively by virtue of their "administrative resources," i.e. their connections in the corridors of power, while the bureaucracy flourishes and enriches itself by collecting tribute from businessmen. On occasion, the fusing of money and power has been taken to its logical conclusion: In 1996, Vladimir Potanin was appointed deputy prime minister and Berezovsky was made deputy secretary of the Security Council.

As Khodorkovsky himself wrote in an article for Nezavisimaya Gazeta in 1997: "The most profitable business in Russia is politics and that's the way it will always be. We got together and drew lots to decide who should go into government. Potanin came up lucky. In government, he did a great deal for his own company Unexim. Next time, it will be someone else's turn."

The billionaire Khodorkovsky, just like the rest of the oligarchs, grew out of this incestuous union between money and power. In the second half of the 1990s, Khodorkovsky's reputation in the West was not at all good. Legal action was taken against him by Western minority shareholders, whom he had squeezed out by the flagrant use of "administrative resources."

However, as he developed his business he was the first of the Russian oligarchs to realize that in order to be accepted as an equal by the international business elite, Yukos had to fundamentally alter the model of behavior learned in the jungle of bandit capitalism.

He made his company transparent, introduced Western accounting standards and standards of corporate governance, openly declared his income and started to spend major sums on social and educational projects. By coming out of the shadows, he ceased to be dependent on the bureaucracy and the state. The former oligarch transformed himself into a modern businessman. In just 10 years, he had done what took American robber barons three generations to achieve. But his impetuousness proved to be perilous.

At the February RSPP meeting, Khodorkovsky came convinced of his role as pioneer in transforming the business system. "Your bureaucracy is made up of bribe-takers and thieves" was not a trivial complaint to the good tsar about his remiss and cunning servants who had once again stolen some oil company.

Khodorkovsky's message was much more serious. He was saying: I want to play by new rules according to which business is open, competitive, law-abiding and not dependent on the bureaucracy. Many of my colleagues are prepared to follow my lead; and only in this way can we pull the economy out of the system of bandit capitalism that was created with our involvement and that condemns Russia to stagnation and marginalization. But alone we cannot break the vicious circle of money and power. Both the state and its bureaucracy must be prepared for this as well. And therein lies your historic responsibility, Mr. President.

The president did not get it or did not want to get it. His reaction to Khodorkovsky's words is understandable and natural. He took umbrage on behalf of his beloved "administrative vertical" -- and all the more so as the charges came from someone who not long ago had got fat off this administrative vertical.

Presidents, however, do not have the right to indulge their feelings. Historically, Khodorkovsky was right. What he was proposing and what he had done in recent years was aimed at freeing the country from the trap of oligarchic capitalism.

This does not suit the bureaucracy and its armed wing -- the so-called power structures -- one bit. This is why they went for their victim in such a frenzied fashion, after receiving the command. The path proposed by Khodorkovsky of separating business and the authorities would in time deprive them of their role as providers of protection to the whole of the economy from oil companies to furniture shops and grocery stalls.

The onslaught of the siloviki on business is no noble campaign to restore social justice, it is a revolt by dollar millionaires against the billionaires. This is no battle against the flawed system of criminal capitalism, but rather a battle for the redistribution of power and property within the existing system.

The two interlocutors, who unfortunately did not understand each other back in February, together could do a great deal to modernize Russia. But they have both become hostages of the old system -- one in Special Isolation Unit No. 4 of Matrosskaya Tishina and the other in the Kremlin.

Andrei Piontkovsky, an independent political analyst, contributed this comment to The Moscow Times.