Building the System

OPENING SCENE

Moscow, June 2003. Mikhail Khodorkovsky, the head of Yukos oil company and the richest man in Russia, is at a roundtable with Putin at the Kremlin. The meeting is televised. Khodorkovsky, who has spent years building Yukos into an internationally respected corporation with Western-style auditors and a transparency of operations unusual for Russian business, raises the issue of corruption directly. He references a specific deal — a state company acquiring a rival at an inflated price — and suggests that corruption of this kind is becoming endemic. Putin listens. Then he responds by asking Khodorkovsky why Yukos acquired its original assets, in a thinly veiled reference to the loans-for-shares auction at which Khodorkovsky had bought the company for a fraction of its value. The exchange is calm, professional, and televised for the nation to see.

Four months later, Khodorkovsky is arrested at gunpoint at a Siberian airport during a refueling stop. He will spend ten years in prison. Yukos will be assessed billions in back taxes, declared bankrupt, and its main production asset sold at government auction to a company that immediately merges with Rosneft, the state oil corporation. The men watching from Russia's boardrooms understand the message without needing it repeated. Political opposition, financial independence from the state, and public criticism of the system are no longer compatible with business survival. The informal negotiation between Putin and the oligarch class has concluded.