Russia's Sinking Ship

The sixth annual “Khodorkovsky Reading,” a seminar devoted to discussing the economic and political fallout from the Yukos affair, was held in Moscow last week. These seminars are organized by the Memorial rights group and the Indem think tank. The forum brings together Russia’s top democratic leaders and thinkers and searches for ways to boost the country’s economic, scientific and technological development. After an entire day of discussion, the findings were certainly disturbing.

Economists Yevgeny Yasin and Sergei Aleksashenko spoke about the impact the Yukos affair has had over the past seven years on the degradation of public institutions, law enforcement and the judicial system. The attack on former Yukos CEO Mikhail Khodorkovsky and seizure of Yukos has also led to the growth of corruption and has scared off investment. Businesspeople fear that their assets will be used for blackmail or seized outright by corrupt bureaucrats and law enforcement officials. Thus, most businessmen refuse to invest money in the country.

President Dmitry Medvedev has not convinced too many people that his plans to modernize Russia will amount to anything. New Economic School rector Sergei Guriyev pointed out that Russia’s per capita gross national product is now equivalent to what South Korea’s was 11 years ago. But even then, South Korea stood much higher than today’s Russia in international ratings based on its stable business climate, rule of law, independent judiciary, protection of private property and the high quality of its government institutions. It was precisely these factors that made it possible for South Korea to attract huge investment from all over the world and to achieve rapid economic growth.

By contrast, Russia has not even set improving the quality of its institutions as a strategic goal. What’s more, as in almost every resource-rich country with weak state institutions, the ruling elite have no interest in the country’s economic development. The only thing they are concerned about is preserving their economic and political monopoly that allows them to steal as much of the country’s assets as they can. As long as this monopoly remains in force, any attempt to modernize the country is senseless.

According to Guriyev’s “70-80 scenario,” when oil prices hit $70 to $80 per barrel, the Russian authorities enjoy a 70 percent to 80 percent popularity rating but the country degrades into a period of stagnation resembling the 1970s and 1980s under Soviet leader Leonid Brezhnev. At the conference, economist Alexander Auzan perhaps best summed up Russia’s terminal condition: “The Russian ship is sinking — slowly, but surely.”

Economist Mikhail Delyagin is convinced that the true goal of the ruling elite is to maintain the country’s backwardness and enrich their backbone of support — the bloated bureaucracy and siloviki. Economic development and modernization bring no benefit to the elite and their lackeys within the bureaucracy, all of whom have enriched themselves by seizing authority and property. After all, development requires a demonopolization of the country’s economic and political institutions. This necessarily means competition and the emergence of new independent forces, including a free media, that would demand transparency and that government officials answer to the people.

Only free, independent and enterprising people are capable of being the driving forces behind modernization, but those are exactly the people whom the state is persecuting. How can it invite foreign scientists and engineers to work at its planned innovation city in Skolkovo while at the same time hold dozens of Russian scientists and scholars in prison on trumped-up charges of espionage? How can Russia attract Western investors when it jails Khodorkovsky in a clear case of selective justice and when the country’s most successful businessmen, such as former Yevroset owner Yevgeny Chichvarkin, are forced to flee the country for fear of arrest?

No resolution of the Yukos affair is in sight. Yury Schmidt, a member of Khodorkovsky’s legal team, pointed out the absurdity of the charges in the case proceeding in Moscow’s Khamovnichesky District Court. Judge Viktor Danilkin has made decisions during the trial that call into question whether he is truly an independent judge or a puppet of the prosecutor and of the Kremlin ringleaders who orchestrated the Yukos affair.

Medvedev’s “fight against corruption” is no more than a front to disguise — and thus aid and abet — the corrupt system that lines the pockets of so many bureaucrats. The criminal “infernal rules” of this system are highly self-destructive. One manifestation of these “infernal rules” is the Khromaya Loshad nightclub tragedy in Perm, in which more than 150 people died as a result of fire code violations by the owners. When will we see an end to these “infernal rules”? Unfortunately, the Khodorkovsky Reading did not provide a conclusive answer to a question that is so crucial to Russia’s survival.