NG: Mr Lebedev and Mr Khodorkovsky, thank you for finding some spare time.
Lebedev (laughs): Well, it’s certainly something we have a lot of.
NG: Then let’s get to it. An article published before Moscow Mayor Yuri Luzhkov was dismissed said that releasing those charged in the Yukos case will destabilise the country. What is your response to this statement?
Lebedev (after a pause): I didn't expect this question to come first. My comment would be very brief: I doubt that releasing Khodorkovsky and Lebedev will destabilise anything, least of all Russia. On the other hand, it would surely destabilise our families (laughs) and their lifestyle, because they would have to get used to living with us again, and because our grandchildren, children and wives would see us in the flesh. I wouldn't be surprised if this even shocked our families for some time until they got used to us.
NG: Mr Khodorkovsky, would you like to add anything?
Khodorkovsky: No. We have a great appreciation for each other, but we don’t overrate our significance for the entire country.
NG: We don’t really have any time to work our way into this, so I am sorry that we have to start with tough questions right way. Do you think Russian business has become largely controlled by the state, while most in the business community have pledged their loyalty to the government and essentially turned themselves into employees?
Lebedev: At least from what I've been reading and getting access to, that appears to be the case. Yet this doesn't happen to everyone. Again, from what I know, some people try to continue being businessmen. How their careers turn out, of course, is a whole other matter...
Khodorkovsky: I agree.
Dysfunctional elite and Russia’s future
NG: Now for my main question. What are the key political, economic and social challenges that Russia’s president will face in 2012? How long will the system last without political and economic competition? What candidate would you support and do you see a chance for a real alternative political force to emerge?
(Mr Lebedev raises his hand)
NG: All right, go ahead.
Lebedev (pointing at Khodorkovsky): He knows. He is the expert here. During the trial I’ve learned various new words like “tools”, “methods”, “mechanisms”, etc. So my method here is to make someone else do the talking (laughs). He knows what to say, I don't.
Khodorkovsky: The key challenges for whoever will be elected president in 2012 will stem from the escalating gap between the imminently declining potential and growing risks in the still backwards economy, plus bureaucratic greed and voter expectations.
The Russian economy cannot be retooled under the current government system, which is inefficient, obsolete and thoroughly corrupt. Russia, for a plethora of reasons, will be engulfed in yet another crisis around 2015.
The list of problems is long. Here they are in no particular order:
The utterly exhausted potential to sustain our raw-material funded growth. In other words, we will not be able to produce more, while prices will no longer support any sufficient revenue growth.
A steady decline in the working population.
A steady expansion of security agencies and government bureaucracy, or, in other words, those who are part of the working population that not only don’t create wealth, but also redistribute it for their own benefit.
Very slow growth in labour production, because managers’ performance is gauged against quite different criteria.
Lack of an industry development strategy, (everybody has already forgotten about the focus growth sectors put forward by the President) seeing as how huge resources are being pumped into hopeless projects aiming to compete with China and, in the future, with India in sectors where these countries have obvious competitive advantages, such as cheap labour.
So, the next president will face a simple choice: either the working population will have to produce more or the rest will have to consume less.
The equation is even simpler for the "rest": the more bureaucracy consumes, the less is left for the others. And vice versa.
Putting pressure on producers won’t work. They will pack things up and leave. They are already leaving.
You want my prediction? Our elite will not wake up until things get really bad. All the president's attempts to make quick fixes here and there will be sabotaged. And he won’t have the nerve to make institutional reforms.
This will lead to:
Rising prices, tariffs and utility bills;
Declining quantity and quality of free healthcare and education services;
Increasing pension age and devaluation of welfare benefits;
Creating a non-competitive third-wave production capacity.
NG: So what is the solution? It has been five years since your article "Left turn" was published in Vedomosti, in which you called for reconciling freedom with equality and argued that the way out for Russia was to take a political left turn. Do you still think this way? Is Russia in danger of seeing nationalists, rather than leftists, come to power in the dreary context you just outlined?
Khodorkovsky: In “Left turn”, I wrote that the left trend, in its broadest sense, is an objective process at this stage both in Russia and globally, and political forces who want to remain influential must reckon with it. This trend includes environmental movements and demands for more social equality (including protests against such privileges as blue flashing lights on government cars).
Nationalist sentiment is inevitable when building a national state; and we are in fact trying, once again, to make our choice between an empire and a national state. This choice will have to be made. But the job of ideologists, the intelligentsia and the entire elite is not only to make the right choice, but also to channel such public trends and sentiments into a positive and truly patriotic agenda. Not into talking about how we love Russia, and definitely not into kicking and humiliating those we invited to work in our cities, even if we did so out of our own laziness and stupidity. We could, for instance, transform this energy into infrastructurally and culturally integrating Russia’s enormous territory from Vladivostok and Sakhalin to Pskov and Kaliningrad, into cracking down on alcohol and drug abuse, child and adolescent neglect, or hazing and harassment in the army. There are quite a few real big problems out there that need to be addressed so that our country and the Russian people can have a decent future. So that other nations would envy us and would want to come and live here, instead of quietly despising us, and so that we would feel our unity as a nation, rather than remain casual neighbours in a filthy dormitory we have fouled ourselves.
NG: You spoke about the elite and its important choice. Isn’t it amazing how our elite ducks the issue by insisting that Russians are not used to being free, that freedom is harmful for a nation that prefers strong-arm rule? Now even the West has picked up the mantra that Russians have a Stalinism gene with little inclination for democracy. Or is it the elite who are the problem, rather than the public? You’ve been it prison for seven years now. Would you say you are no longer used to freedom?
Khodorkovsky: Not used to freedom? As for individual people, including Russians, this is nonsense. Our Creator blessed us with free will. Our compatriots abroad adapt perfectly well. But our government and public institutions are indeed a scorched desert. The elite are lazy and utterly self-serving, no matter what patriotic rhetoric they might spew. It is not, however, the elite's fault alone. The existing rules of the game prevent even them from feeling in any way responsible for the country.
There is no permanent and protected ownership, no permanent and effective institutions, and no generally recognised moral standards. We are surrounded by fly-by-nights and timeservers. This is a very precarious situation and it must be changed immediately.
This can be done only through institutions that should become functional tools, rather than a mirage that can be sold for “export”. Proclaimed values should provide real goals to motivate our daily work instead of knee-jerk slogans smacking of Soviet party line propaganda. The people, the country and even the elite cannot develop under imposed values and functional schizophrenia.
This is schizophrenia, because nearly all institutions are not what they pretend to be. Parties are not exactly parties, unions are not quite unions. Courts have little to do with dispensing justice, property is not property, and the law is a mere subject for further discussion and bargaining between law enforcement agencies.
Lebedev: I think, from what I know about Russian history, Russia has always had an elite, but its standing and role have been continuously changing. Today, we do have an elite. The question is whether the elite themselves want to be useful and relevant, especially in times of crisis when a substantial number of Russians believe that the elite's views provide orientation for the public on nationwide issues and challenges. Traditionally, the word "elite" implies a group of people who do credit to their country and whose opinion is reckoned with. In recent time, over the last 20 years, this term was used in reference to such revered figures as Andrei Sakharov or Dmitri Likhachev. Clearly, we do not see people of that calibre around any longer. That does not mean that they don't exist. They are simply not visible. Today we cannot see the true elite, the people who would voice the public’s opinions, needs and expectations. But we had this elite back then. Everybody recognized them as such. It was like an axiom or a theorem, which was readily provable. Today this is no longer the case. The current elite should get clear about their own identity. If they consider themselves as part of the Russian elite, then they ought to face up to the current challenges, and not just serve their own needs. Here, of course, comes the question: who is creating the elite and by what means? We have several kinds of elite: television shows us one type, the radio may offer another version, and tabloids give us yet another one. But who represents the elite in the public mind? The problem is that we actually have no elite that is understood and recognized by the general public. Now I am not talking about a few individuals whose names I’d rather not mention, just in case. So basically the conclusion is that we have no elite that, like Sakharov and Likhachev, could be seen and recognized as such, even by their opponents.
NG: What would you regard as the principal tell-tale feature of any elite? How can we identify these inconspicuous people?
Lebedev: Here, during our trial (just stopped short of giving it another name) we often hear the term “good faith”. It is critical for understanding the real meaning for any given terms or words that we use. Good faith is the key.
“What are we doing here?"
NG: Mr Lebedev, you don’t have to answer this question if you don’t want to. We found out that you received some long-awaited documents from the aggrieved party who confirmed that your work had generated a profit for the company, not a loss. This fact essentially destroys the case against you. If it is not too sensitive an issue, could you tell us about these documents?
Lebedev: We actually discussed this with our defence lawyers today. It was quite dramatic: it was almost the last day of the court inquiry when the judge told us that the papers the court had requested finally arrived. The court even warned those “aggrieved" parties that if they failed to submit the documents it would...
Khodorkovsky: Fine them (laughs).
Lebedev: … somehow put pressure on them. So finally the court received the papers from the so-called "aggrieved" parties. From Rosneft, for example (Lebedev arranges the documents on his table in the defendant’s cage). As you know, we are charged with “stealing all the crude oil". What does Rosneft tell us about this “theft”? In 2003, this amazing theft brought the company 68 billion 862 million roubles in revenue, while it spent 61 billion 672 million roubles. So the company made a profit of seven billion roubles from sales of that very crude oil. That’s what they call “theft”. That’s how they were “aggrieved”!
NG: So in reality they made a profit?
Lebedev: Absolutely. Seven billion roubles. That’s what was “stolen” from them. Unfortunately, we can’t directly ask Rosneft’s representatives, let alone the man who signed those documents (a Mr. Poklonov acting under a power of attorney), how exactly they had anything stolen from them. But here are the records, and it’s their documents. You can’t do anything about it. The oil produced was sold at a profit, not stolen.
NG: The “victims” haven’t shown up in court, have they?
Lebedev: No, they haven't.
Khodorkovsky (calmly): It would be good to know how they got the revenue from the stolen crude.
Lebedev: Right. And it would be interesting to hear how bad the damage was. Maybe they had nowhere to store the seven billion roubles? Or thought that it would come in coins? Then it would have been hard to handle indeed. Maybe they hadn't booked a warehouse in advance? We could have consulted them on how to best store the money...
NG: One more question about witnesses. Mr Khodorkovsky, you have wanted to see certain senior government officials testify in court. German Gref (head of Sberbank) and Viktor Khristenko (Russian Industry Minister) have stood here as witnesses. But Prime Minister Putin and Rosneft CEO (until recently) Sergei Bogdanchikov chose not to. Can you tell us what questions you would have asked them?
Khodorkovsky: Given the procedural opportunities at our avail, I would ask them specifically about what they know about the circumstances of the case. Vladimir Putin was Russian prime minister and then president throughout the period when we were allegedly stealing oil. I would like to ask him if he believes that he could possibly fail to notice during that period the missing 20 per cent of all the oil produced in Russia. Of course, I would also like to know how Russia's official position in Strasburg and the Hague (the Russian deputy minister of justice, a rather important position, is there representing the Russian government) coincide with its position here. In the former two courts, the allegation is that Yukos sold oil and earned a profit - which implies being a legitimate owner of that oil and subject to taxation – and, allegedly failed to pay all the taxes, therefore its subsequent forced bankruptcy was legal and justified. So how does that position maintained by one body of our government, the Russian cabinet led by Vladimir Putin, correlate with the one promoted by the Prosecutor General's Office. The latter insists that the oil was "stolen". As we understand it, paying taxes on stolen property would be a ludicrous proposition. Since both arguments originate from the government (whose officials have been prosecuting the case in court, at least with regard to the economic charges, and also defending the position of the Russian Federation in international court) and obviously contradict each other, I would like to know which one of them is right. Or maybe both are mistaken? (laughs)
Lebedev: My question would be as follows: I had spoken about this topic and thought, before this trial, that it was generally understood that there is, by default, an economic discrepancy between prices for Russian oil on the domestic market and in Rotterdam*. All my questions are related to the Rotterdam phenomenon, or syndrome, if you will. The question is very simple. One of the key elements I would like to address is export duties.
Anyone can see that export duties are levied on crude sold for export. My question concerns domestic prices. Are Putin, Sechin and Bogdanchikov aware of the origin of this economic discrepancy?
Isn’t it this price spread that annually refills the budget of the Russian Federation with export duty revenues, exactly because the oil export duty is a way of capturing the price difference, which ends up in the budget?
And is it known, or, let's say, does Putin remember that he was the one who set the export duty rate when he was prime minister? And, on becoming president of the Russian Federation, he signed legislation regulating the federal budget, which largely depends on export duties. (At the end of the interview, Lebedev provided Novaya Gazeta with copies of the aforementioned decrees Putin signed in 1999 and 2000. See appendix)
And are all of them, including the prosecutors, investigating officers and judges, aware that their salaries, or at least part of them (laughs), actually come from this price difference?
So if people know this, then it begs the question: what are we doing here?
If this is a secret, or if it remains a secret for the Prosecutor General’s Office or some of its exceptionally “talented” employees, then the question remains the same: what are we doing here?
The trumped-up charges against us are based on a simple argument, as you know, that oil indeed was sold (they even put it that way in the indictment), but not at Rotterdam prices. But why did it have to be sold here in Russia at Rotterdam prices?! That’s where they detected “theft". Thus my questions to these witnesses would refer them to well-known laws and regulations. I would also ask them whether the domestic oil prices and Rotterdam prices have been similar over the past years, and whether the government still applies export duties, and if it does, then why, and who signs the decrees. Ironically, Putin is prime minister again, so he signs new export duties into law.
About corruption, police and businessmen behind bars
NG: A question for you, Mr Khodorkovsky. Two years ago we wrote an article that noted that corruption accounts for about ten per cent of Russia’s GDP, or approximately 30 billion dollars. Given that you, although in custody, are well informed and see what is going on in the industry, what would be your estimate of the corrupt share of our economy?
Khodorkovsky: I talked about 30 billion dollars in corruption back in 2002-2003. I cited estimates from Russian and international organizations whose opinion I respect. The current scale of corruption has been described by the deputy prosecutor general, a Mr Buksman. Two or three years ago, he gave an interview about corruption, and put it at around 230-300 billion dollars.
NG: So the trend is upward, right?
Khodorkovsky: Yes, it's on the rise. Though, of course, I am not convinced that it’s merely a case of money changing hands between individuals. It is rather the sort of corruption defined in corruption clauses of those international treaties that Russia has joined: illegal benefits obtained by public officials, specifically by awarding government contracts to their relatives, or through various kickbacks, etc. This corruption involves a lot of money. It is beyond any comparison with the petty bribes collected by the traffic police, let alone doctors and teachers…
NG: After talking about corruption I can't help asking about the much debated bill on the police. Have you read it?
Khodorkovsky: During our trial, we haven’t dealt with the militia (current name for police) as such, but, of course, I’ve read the bill very carefully. I must say that for the most part I share the opinion of the Russian Lawyers Association, which has publicly expressed its concern that the original phrasing of the bill would be hard to amend without altering its fundamental premises. The main problem is that by signing it into law the Russian president will assume personal accountability for the police, and the more so with the militia-to-police renaming campaign and other things. But nothing is going to change! Not because the bill is good or bad (I don’t even take that into account), but due to a lack of pre-planned organisational and practical actions that would drive the process of transforming the Russian militia or police during 2011 or even 2012.
This is just another initiative that will fail to meet people's expectations, and it will, unfortunately, be embarrassingly associated with the president. Other challenges are standard management problems: First, it’s a behemoth organization of 1.5 million people, which is impossible to manage properly. You simply can’t hire that many people and manage them efficiently across such a vast territory. The second problem is the quality of employees. It is impossible to recruit or select 1.5 million Russian guys who would essentially stand out from the rest …. (I don’t know the exact number of our working population) thirty million Russian guys or so. They are going to behave in exactly the same way! With the only difference that they will be vested with enforcement rights granted by that law. And, finally, it is not feasible to complete the process over such a short period, even if the bill were perfect and backed with brilliant guidelines and established training centres. It is impossible to retrain so many people and ingrain in their heads new regulations and rules of conduct within a limited timeframe. From my extensive managerial experience, I can say that even if all the arrangements were in place, it would take me about two years to complete a management job like this in my company, which was much smaller. This is perhaps the biggest challenge today.
NG: Perhaps you both have thought over why, despite President Medvedev’s amendment to Article 108 of the Criminal Procedure Code, which prohibits arresting businessmen for entrepreneurial crimes, this amendment is so stubbornly resisted in your case, as well as in other ones? They do let some of them go, but yet ... Why do courts, prosecutors and police resist it so fiercely?
Lebedev: There are several reasons. The primary one is that this is a habit. The basic habit of a system where nobody fears anything until, for the first time, an offender is severely punished and stigmatized in public. We here complain that some judges together with prosecutors violate the amended code, under which they can no longer arrest people on certain business-related charges. But ask yourself: What happened after they continued to ignore the new provisions? What happened to law enforcement officers who failed to take notice of the presidential amendments? Did anybody lose their jobs?
NG: None so far, we can confirm that.
Lebedev: There’s your answer. Another reason is the habit of the system or its members to draw benefits for themselves in a variety of ways. You write about malpractice all the time and I know it first hand as a convict: don’t forget that every second person released from custody does not just simply walk out; they usually have to post bail. The going rates are written out, too. Besides, as I understand it, this is all a system of having to make bail twice, because one amount is paid to the court and the other “bail” has to go elsewhere before you can actually see the light of day! I would say that it’s a kind of half-racket, half-extortion or half-corruption. This practice may become the norm. At this point I think people are just learning to use it, looking for better ways and means to get around the new amendments. When they have learnt, in the worst sense of the word, to use Article 108 to support their “business”, then probably it would be a better solution for those people who won’t have to spend time in detention cells, but the level of corruption will only increase. This will happen because the underlying meaning, which is being distorted, is “This is prohibited!". But there is also such a thing as being innocent until proven guilty: let people argue their case in court, because economic matters should be judged based on arguments and documents, unlike violent crimes (if you kill someone, you go to prison), they are more sophisticated.
Back to the main point. The amendment doesn’t work because those who ignore it can get away unscathed.
Khodorkovsky: The president’s amendment is clearly and carefully worded. It undermines the existing "trough", the one which has long been leeched upon by many people. It's a dismal exercise, but we can follow the progress of many of Medvedev's initiatives and see which of them work and which don't. Those that disrupt these “troughs” make extremely slow progress and are widely sabotaged. That’s what is happening now to the amended Article 108.
Lebedev: I’ve long had no fear for my life
(Rost finished filming the interview, since camera time was limited, and began his round of questions on subjects outside the trial)
Rost: I have a different type of question for you. Freedom, among other things, means not having the expectation of fear. Did you have such expectations in your outside life? Or did you feel free? Whatever your answer is, I have a follow-up question: do you have this expectation of fear now? Could it be that regardless of your current circumstances you feel a freer man now?
Lebedev: Let me see if I understand your question correctly: do you mean fear for my life? Fear can come in a number of forms: fear for your child, existential natural fears you experience every day … If it’s about fear for my life, I’ve long had no fear at all for a very long time now. As for fearing for my family and friends, of course, it is always there. I feel it as a man, father or grandfather ... I don't always call it fear, but rather anxiety or worry that I do feel for others, but never for myself. As for my outside life … do you mean before the arrest?
Lebedev: You know, I’m already well over fifty, and I have children and grandchildren. I have almost no regrets whatsoever. I think about it in pragmatic terms: What could be the causes of my fear? What is there for me to be afraid of, except for the lives and health of my family and loved ones? Should I fear for my own safety? Well, I would say that there is no point in talking about this; they can do anything they want to me whenever they please. I won’t even give you any examples (laughs). So why bother with fears? Look… Before my arrest, the approach I had was almost the same that it is now, but the way I felt was entirely different. In the last three or four years before the arrest, I had felt extremely comfortable doing my job. You see, I had this wonderful feeling that I was very comfortable with my work. Of course, my colleagues (puts his hand on Khodorkovsky’s shoulder) helped a great deal. It felt really comfortable. I had no time, I regret to say, to think more about all the disgusting things and risks out there in Russia. Well, sometimes you read about things in newspapers or catch something on television... But getting engrossed in your comfortable job somehow dulls your ability to relate to many different issues that, as it turns out, have never gone away. Not that you fail to notice them altogether, but you view them from a different perspective. But now that they hit your precious self, well...
You know, frankly speaking, what happens around me today makes me laugh rather than fear anything. Perhaps, this is some supreme sort of fear one could think of?
Rost: Maybe it is your protective response?
Lebedev: I don’t think so. Well, if I see something as being funny, this, of course, could be a protective response, I don't know, but all those so-called fears often appear so laughable to me.
Khodorkovsky: For many years, I was the man in charge, that is, a person accountable for a huge number of people working at Yukos; people with families, and also to shareholders. This is quite a burden to carry. So every time you say something or do something, including during interviews with reporters, you think how this is going to impact the people, those who do the work and those who hold the shares. This is, of course, very stressful and forces you to be on your guard. After I was relieved of this accountability (both men laugh), this part of the burden was gone, and in this respect, of course, I'm less worried and more at ease.
Rost: In this part of your life.
Khodorkovsky: Yes, in this part of my life I’m more comfortable. As for personal threats and problems, well you know what our life has been like over the last twenty years. The risks have always been there, both before and after, and it is hard to compare them.
Rost: We are running out of time. I wanted to ask you one more question. When you were free, you were surrounded by a number of temptations that had to be overcome in order to preserve your integrity: power, money, unlimited possibilities, anything your heart could desire… Here, in this situation, sitting in this cage, the only danger you need to avoid is losing your dignity. As simple as that. Could you tell us which of the two challenges is the toughest?
Lebedev: In short, we are doing our best. As for how I deal with temptations... Well, I would not really mind having some temptations around (everybody laughs). I want to go back to your previous question. What is extremely frightening on the government level is our public prosecutor, Lakhtin**. This is what is really scary. The fact that the government allows such a person to take part in our trial in this capacity (without mentioning the remote control system they use for manipulating him), that must be viewed as horrifying in terms of the government’s methods. I am keeping myself from using any epithets or descriptive wording for a reason. This is what should frighten us. This is something that everybody ought to pause and think hard about, everybody starting from that place (pointing at the door to Judge Viktor Danilkin’s room), and, well, including everybody present. You won’t want to face this kind of opponent, even in an administrative hearing.
Khodorkovsky: I can only add that when we were free, we did our best to restrain ourselves within reasonable boundaries. Whether we succeeded is not for us to judge. Whereas here... they will do their best doing that! … (laughs) they surely will. And what comes out of it will be, again, not for us to judge.
(The guards indicate that our time is up)
Rost: Look, during these seven years, which is an extremely long time, have you ever felt happy, at least in some situations?
Lebedev: Of course! Quite often.
NG: Thank you very much for your time!
Khodorkovsky, Lebedev: Thank you too! And thanks to your colleagues who sit in on the trial.
NG: Bye for now.
* Rotterdam Energy Futures Exchange
** State prosecutor in the Yukos case
Beyond the interview
NG: With whom do you primarily discuss things or correspond today? What people, encounters, letters, face-to-face conversations (even with your restricted contacts), since 2003 have made an impression on you? Whose opinion is especially valuable and reputable for you? Tell us, if possible, who these people are.
Khodorkovsky: You are right that my current circle of contacts is quite limited for obvious reasons. There are many people in Russia whom I respect. They work in different professions, of course. Among these people are physicists, doctors, lawyers, writers, artists, etc. In my fields of interest, such as law, social order, government, and economics, it is now difficult to understand what many experts really think due to their self-censorship. Take for example such clearly serious professionals as Surkov, Tretyakov, Pavlovsky and a number of others. Their intellectual loyalty obscures what their real views on major public issues are. For me it is always interesting to listen to or read Yevgeny Primakov, Tamara Morschakova, Viktor Geraschenko, Yevgeny Yasin, Yuri Afanasyev, Yuri Ryzhov. I’ve had a very enriching exchange of ideas with Lyudmila Ulitskaya, Boris Strugatsky and Grigory Chkhartishvili.
Organizations that I consider to be reputable include such think tanks as Levada Centre, the Higher School of Economics, Russian State University for the Humanities, and the Institute of Contemporary Development. I try to keep up with articles written by Vladislav Inozemtsev, Vladimir Ryzhkov, Liliya Shevtsova and some other experts. Along with some other titles, I enjoy reading Novaya Gazeta and read almost the entire newspaper.
Editor in chief
The court considers the appeal in the case of Navalny brothers. Alexey supports brother Oleg, who is sitting in prison2149