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The Yukos Way

Nevertheless, as the revolutionary dust settled and the backbone of capitalism began to take shape, Yukos was an exemplar of clean and transparent business practices, at least by the standards of the day. Yukos was the first large Russian company to adopt international accounting standards and the first Russian oil company to issue financial statements in accordance with generally accepted accounting principles (GAAP). The company added accountants who had been trained in the West to its staff, and retained PricewaterhouseCoopers to audit its annual reports.

Bank Menatep also set up an international advisory board to help it integrate into the global business community. The bank was rapidly moving away from the Wild West practices of the 1990s. Wanting to be taken seriously as a legitimate global business, it decided to act like one.

Khodorkovsky also began imitating the philanthropic practices of his Western counterparts. Both personally and through Yukos, he donated hundreds of millions of dollars to charities. The company gave college scholarships to the high-achieving children of its employees, as well as to students focusing on oil-related industries. Khodorkovsky personally bankrolled numerous organizations such as the Eurasia Foundation, an American nonprofit that supports the development of small businesses.

Nonprofits are powerful political players in this part of the world, and Khodorkovsky's involvement with them would prove to be a major contributor to his downfall.

The Yukos education programs reflected and promoted Khodorkovsky's personal vision for Russia. In one such project, New Civilization, high school students designed an imaginary country, chose its political system and currency, and elected a government. It was Khodorkovsky's effort to instill democratic and free-market principles in Russia's youth. That put Khodorkovsky at odds with Putin and his belief that Russia's greatness required a very strong—autocratic, if necessary— hand on the helm.

In addition to supporting organizations hostile to Putin's government, Khodorkovsky personally spoke out against the man, loudly and often. He lambasted the Kremlin for infringing on civil rights, accused state officials of corruption, and criticized the government's control of oil transportation through its pipeline company, Transneft.

Openly critical of what he referred to as "managed democracy," he claimed that the military and security services exercised far too much authority. In a 2003 interview with the Times of London, he said:

It is the Singapore model ... in Russia these days. It means that theoretically you have a free press, but in practice there is self-censorship. Theoretically you have courts; in practice the courts adopt decisions dictated from above. Theoretically there are civil rights enshrined in the constitution; in practice you are not able to exercise some of these rights.

His observations may have been spot on, but without doubt he was baiting the bear, perhaps under the foolish belief that his great wealth would protect him.

His largesse reached deep into the political arena. He gave freely to opponents of Putin's own party, United Russia. As the 2003 elections approached for the Duma (Russia's lower parliamentary house), Khodorkovsky increased his financial support of the Union of Rightist Forces, the Russian United Democratic Party, and even the Communist Party. By supporting the opposition, Khodorkovsky hoped to keep United Russia and other pro-Putin politicians from achieving a two-thirds majority in the Duma. He pointedly refused to contribute to Putin's United Russia, despite the party's repeated requests.

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