MOSCOW – Mikhail Khodorkovsky (search) may have been sitting in the defendant's cage, but the oil tycoon's case has put President Vladimir Putin's (search) Russia on trial.
The campaign against Yukos (search) and its leaders is widely seen as Kremlin punishment for Khodorkovsky's growing clout, his perceived political ambitions and the presumption with which he sought to shape state policy. Despite Putin's vows to reform the judicial system, the closely watched trial threw a spotlight on Russia's (search) flawed justice with its presumption of guilt, a lingering shadow of the Soviet era.
Putin may nonetheless look at the trial as a victory. At least for the time being, he has taken a potential rival with billions to spend out of the picture and has cowed other so-called oligarchs — the superrich tycoons whose cash and connections gave them political influence under Putin's predecessor, Boris Yeltsin.
"First of all, he stopped one of the leading oligarch groups from taking power — political power in addition to economic. And it's a very popular decision," said Sergei Markov, a Kremlin-connected analyst. "Thirdly, of course, it's diminished the political ambitions of other Russian oligarchs."
By dismantling Yukos and taking over its biggest subsidiary, Putin's government also has strengthened state control over the lucrative oil industry.
Khodorkovsky, Yukos' founder, was sentenced to nine years in prison Tuesday, ending the biggest case in post-Soviet Russia. The 41-year-old was convicted on charges that included tax evasion and fraud. He promised to clear his name, and his Yukos oil company promised to fight a series of court battles.
The trial, Markov told Associated Press Television News, "has very good consequences for Vladimir Putin."
Many analysts disagree, saying his quest for control has come at a heavy cost for Russia — and perhaps for Putin himself. The trial, they say, marks a setback in Russia's recovery from decades of Soviet dysfunction and placed it further from what citizens desire: a normal country.
"The Khodorkovsky case has become something other than the trial of an out-of-favor oligarch," Vyacheslav Kostikov, a commentator and former Yeltsin spokesman, wrote in the newspaper Argumenty i Fakty last week. "Essentially, it has become a mirror of our incoherent state and our ineffective regime."
Early in his first term, Putin vowed to build a "dictatorship of law," and the Kremlin has cast Khodorkovsky's trial as a straightforward application of legality.
But while most Russians believe Khodorkovsky is guilty, they also see the trial as politically motivated, and analysts say the prosecution of Khodorkovsky and the campaign against Yukos shows that the Kremlin views the law as an instrument of authority, not justice.
"You can state the Kremlin's aim in a decent and proper way," said Nikolai Petrov, an analyst at the Carnegie Moscow Center. "But the methods employed for this — the methods of a lawless state, not the rule of law but the use of law — have automatically undermined the goal that the Kremlin set out for itself."
Economically, analysts say, the prosecution of Khodorkovsky has set Russia back by sending a chilling signal to both foreign investors and domestic entrepreneurs, while giving the nod to local authorities across the country to use the law to enforce their interests.
That will only worsen already rampant corruption while stifling entrepreneurship and hampering economic growth, Petrov said.
In 2004, the year after Khodorkovsky's arrest, capital flight from Russia tripled to $7.9 billion, and oil export growth has slowed from an annual rate of over 10 percent two years ago to 4 percent through April this year, raising questions about the efficacy of a stronger state hand in the vital industry.
There was more bad economic news for the government this week as it downgraded its growth forecast Monday to 5.8 percent from 6.5 percent previously, mainly due to a slowdown in the oil and gas sector where Yukos had led a three-year investment-driven boom in production until Khodorkovsky's arrest.
Critics blame greater state control over the oil industry, seen as one of the Kremlin's main goals in the campaign against Yukos, for the slowdown in oil production growth. They say the economy needs the kind of innovative management practices Yukos became known for to sustain strong growth.
Meanwhile, simmering anger in the business community over the messages sent by Khodorkovsky's trial and the treatment of Yukos could translate into trouble for Putin as he seeks a favored successor ahead of the 2008 presidential election.
"Politically, it shows that Putin is weak rather than strong — that he's afraid of competition," said Yevgeny Volk, head of the Heritage Foundation's Moscow office. "He has opened a Pandora's box: People see that he is vulnerable ... and that makes them think more actively about challenging Putin and his people in the next election."
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