The New Tsar (40 page)

Putin’s fierce defense of Rosneft made clear what some in the room had not yet discerned. Rosneft had more than Putin’s blessing. It had a personal connection to him. Khodorkovsky did what no one had dared to do before, certainly not in remarks during a televised meeting in the Kremlin. “He didn’t know,” Illarionov said of Khodorkovsky. “That is the only reason why he started talking about that. He didn’t think that Putin was involved. Otherwise he would never have said anything.”
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Khodorkovsky failed to appreciate the risk he took in criticizing the obscure purchase, but the consequences soon became evident to all. “It was clear to me that we had signed our own death warrants,” Aleksei Kondaurov, one of Yukos Oil’s executives, said afterward.
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Khodorkovsky himself was advised to leave the country, as Gusinsky and Berezovsky had, but
he refused, believing that his power, his finances, his influence, and ultimately the truth would protect him.

“What did I say that was wrong?” he asked.
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W
hat he had done was expose a strategy of Putin’s whose roots reached back to Petersburg more than a decade before, when Putin forged his bonds with the cadre of aides and businessmen concentrated around the Mining Institute where he had defended his thesis. By the middle of the 1990s, Putin was meeting regularly for informal discussions on the country’s natural resources under the aegis of the institute’s director, Vladimir Litvinenko, who had presided over Putin’s dissertation.
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The ideas that Putin and his friends, Igor Sechin and Viktor Zubkov, formulated in their discussions and academic work became the basis for a strategy of restoring the state’s command over Russia’s vast oil and gas resources. Litvinenko, a respected geologist, advocated greater state control as a means not to revive its beleaguered economy but to restore Russia’s status as a superpower. “They’re the main instrument in our hands—particularly Putin’s—and our strongest argument in geopolitics,” he declared.
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Putin’s strategy for extending the state’s control over natural resources had been judicious and incremental, carefully maintaining a balance between the liberals and the hardliners in his own inner circle. In 2001, he appointed another Petersburg aide, Aleksei Miller, as the chief executive of Gazprom, the state enterprise that had never been officially privatized though its shares had increasingly been acquired by its senior executives, leaving the state with only 38 percent ownership. He gave Miller, only thirty-nine, “an absolute mandate for change,” which over the next two years meant bringing the vast company—and its shares—back into the hands of the Kremlin.
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He also reasserted the state’s control over Rosneft, the company Khodorkovsky was now accusing of corruption. Created as a state company in 1992, Rosneft barely survived the 1990s, when its best assets were raided by rivals, speculators, and gangsters.
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It had failed to sell at auction in 1998, when Yeltsin’s Russia was desperate for cash, because it had already been thoroughly plundered. When Putin arrived in the Kremlin, he threw his support behind the company and set out to rebuild it. A driving force behind the effort—then not yet public—was Igor Sechin, the man who used to carry Putin’s bags and greet his visitors at the mayor’s office in Petersburg.

From the start, Putin toggled between liberalism and statism, between the reformers on one hand and the hardliners on the other. The team he trusted—almost all of whom were from Petersburg—contained both. They included economists and academics who pushed to open its markets and the
siloviki
who, like Sechin, came from the security services or judiciary and who favored strengthening the state’s grip on society, business, and politics. Throughout his presidency, journalists and analysts parsed Putin’s decisions to gauge the waxing or waning influence of either faction. In practice, the boundaries were never so rigid,
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and while rivalries surfaced at times in public disagreements, these were rare. Three years into his presidency, Putin’s inner circle remained remarkably united behind him and behind a unifying goal of resuscitating a greater degree of political control over the economy. Behind the scenes, though, the advisers had begun to struggle for power, and profits, requiring Putin’s constant intervention and mediation.

The men whom Putin brought with him to the heights of power had been on the periphery of the profit-making of Yeltsin’s era. Some had done well enough, but none had become billionaires, few even millionaires. They resented those who had not only amassed fortunes but also dictated policy. Yeltsin had tolerated—even encouraged and exploited—the headlong rush to capitalism as a necessary medicine to rid the body of the illness of Communism. Putin’s aides more or less agreed on their boss’s strategy to bring order to the market, even to increase state control over strategic natural resources like oil and gas. The confrontation with Khodorkovsky, though, revealed another motive that drove them. Sechin and others within Putin’s circle “had missed out on the first post-Soviet division of assets in the 1990s and were determined not to miss a second one.”
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T
he meeting in Catherine Hall was overshadowed by events in the world, especially the looming invasion of Iraq. Putin opposed the American-led war, despite President Bush’s strenuous efforts to persuade his new friend to support the overthrow of the dictator Saddam Hussein (which, not incidentally, Khodorkovsky supported). Russia’s deep ties in Iraq dated to the Soviet Union’s cultivation of the Arab world and survived the Soviet collapse and the first Gulf War of 1991. Russia continued to purchase much of Iraq’s oil exports as allowed under the United Nations “oil for food” program developed in the 1990s to ease the suffering of ordinary Iraqis—with profits and kickbacks amounting
to millions going to Russian businessmen and politicians, including Vladimir Zhirinovsky; Putin’s chief of staff, Aleksandr Voloshin; and a little-known oil trading company, Gunvor, whose owner Putin knew from the earliest contracts he had authorized in the winter of 1991.
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Charles Duelfer, one of the United Nations inspectors, was convinced the deals implicated the highest levels of Putin’s government, though the Americans decided against accusing Putin directly for diplomatic reasons.
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Russia’s oil companies, both private and state-owned, also had stakes in Iraq’s undeveloped oil fields, including a deal worth $20 billion for a vast field in the southern desert. The deals remained frozen as long as the sanctions remained in place, but the overthrow of Saddam Hussein’s government threatened to make them all worthless. “Vladimir Putin didn’t consider Saddam a threat,” Bush later wrote. “It seemed to me that part of the reason was Putin didn’t want to jeopardize Russia’s lucrative oil contracts.”
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Putin tried to mediate, dispatching Yevgeny Primakov on a secret mission to persuade Saddam Hussein to resign. Primakov, the veteran diplomat and spy who had been Gorbachev’s envoy to Iraq during the 1991 war, delivered Putin’s personal appeal during a late-night meeting in one of the dictator’s palaces in Baghdad. Hussein listened calmly at first, but then summoned his senior aides and in front of them denounced Putin’s accommodation with Bush. “Russia has turned into a shadow of the United States,” he told Primakov.
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With American troops already massing in Kuwait, Putin figured that he could do nothing more to stop the war, but despite Bush’s endeavors to persuade him otherwise, he would do nothing to support it either. Only days before his meeting with the tycoons, he flew to Paris and joined President Jacques Chirac and later Chancellor Gerhard Schröder in publicly calling for the United Nations to intervene and stop the U.S. invasion. “There is an alternative to war,” their joint declaration said. “The use of force can only be considered as a last resort.”

For two years Putin had sought a new relationship with the United States through his friendship with Bush, but Russia had received little return on the investment. Chirac, who had personally greeted him at the airport in Paris, had as much to offer Russia and tended not to muddy cordial relations with criticism of rights abuses in Chechnya or elsewhere. Putin did not break with Bush outright, but Iraq was a turning point. To him, the war revealed the true ambitions of the United States. In his view, it wanted to dictate its terms to the rest of the world,
to champion “freedom” and use unilateral means to impose it, to interfere in the internal affairs of other nations. When Russia wanted to build civilian nuclear reactors in Iran—a deal worth billions for Russia’s nuclear industry—the United States furiously fought to block it. Bush pledged friendship and cooperation, but Putin also heard the voices of others in Washington, liberals and conservatives, who criticized Russia and seemed intent on keeping it in its weakened post-Soviet state. On the fourth day of the war, the two men spoke. Putin made a point of reaching out on a personal level. He did not reiterate his opposition or even mention it. Putin, Bush thought, was simply worried about the toll ordering a war would take.

“This is going to be awfully difficult for you,” Putin told Bush. “I feel bad for you. I feel bad.”

“Why?” Bush replied.

“Because there’s going to be enormous human suffering,” he told him.
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Bush appreciated Putin’s remarks, all the more so because it was the only conversation like it that he had with any world leader. He then took the opportunity to berate Putin, warning him that Russian companies continued to provide weaponry to Saddam Hussein’s forces, including night vision goggles, anti-tank missiles, and devices to scramble the navigation systems of the American missiles and bombs then raining down on Iraq.
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A
fter the fall of Saddam Hussein, Putin made an effort to move past his differences with the United States over Iraq, but he also began to look increasingly askance at what he considered American hegemony. If American military might was not explicitly directed at Russia’s interests, its “soft power” was—the money and influence that the United States spent on assistance inside Russia, millions of dollars that had flowed after the collapse of the Soviet Union to support civic organizations involved in everything from health care to the environment. As the buildup to the war intensified, Russia ended the work of the Peace Corps in the country and stripped the license of Radio Free Europe, calling both relics of the Cold War. It expelled an AFL-CIO union organizer and ended the mandate of the Organization for Security and Co-operation in Europe’s mission to observe the fighting in Chechnya.
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Each step happened in isolation, with lengthy, legalistic explanations, but a strategy emerged out of the pattern. Putin began to see American conspiracies to isolate or
to weaken Russia, aided by a fifth column within that was increasingly in his mind the greatest threat to the state he was creating.

When Khodorkovsky began negotiations with two American oil giants, Chevron and Exxon, to sell a stake in Yukos or even arrange a merger with them, Putin at first welcomed the talks as international validation of Russia’s growing investment potential, but when Khodorkovsky traveled to the United States and made pronouncements on Russia’s foreign and economic policy, Putin began to fear that the Americans were seeking to dominate the country’s national treasure as well. And, he thought, Khodorkovsky seemed a willing party to the takeover.

The confrontation in the Kremlin in February had not tempered Khodorkovsky’s economic and political ambitions. In April, Yukos negotiated a merger with Russia’s fifth largest oil producer, Sibneft, creating one of the largest oil companies in the world, with an output greater than Kuwait’s. Sibneft’s chairman was the youthful governor of the remote Arctic region of Chukotka, Roman Abramovich, the erstwhile partner of an embittered Boris Berezovsky, who the same year had used much of his fortune to purchase the Chelsea football club in England, spearheading the influx of Russia’s new riches into the capitals of the West. The merger made Khodorkovsky an international celebrity; it was described as “a coming of age for Russian capitalism.”
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A week later Khodorkovsky and other executives met with Putin at his residence at Novo-Ogaryovo, even as he pursued negotiations with the American companies about expanding even more. Putin blessed the merger and told him to report back to him as the details took shape over the coming months. Putin did have other issues he wanted to raise with Khodorkovsky, but he asked to do so privately, after the public meeting had ended.

Putin’s reelection was a year away, and while his own reelection seemed beyond doubt, he worried about the parliamentary elections that would take place in December 2003. Khodorkovsky, like many tycoons, had been pouring money into the parties in the Duma without regard to political ideology and with the Kremlin’s approval; he financed the liberals, Yabloko and the Union of Right Forces, but also Putin’s party, United Russia, and the Communists. The intimacy between business and politics was such that Khodorkovsky’s own managers and executives served in the Duma, notably Vladimir Dubov, who was simultaneously an executive of Menatep, the bank that had made Khodorkovsky rich, and chairman of the Duma’s tax subcommittee. Khodorkovsky used his
influence to lobby against legislation that would hurt Yukos, at times brazenly. Now Putin wanted to rein in Khodorkovsky.