Dispatch

Law and Order: Oligarch Unit

Law and Order: Oligarch Unit

The Russian judicial system isn’t generally thought of as a venue for humor, but the laughs emanating lately from the small courtroom on the banks of the Moscow River where former Yukos CEO Mikhail Khodorkovsky is being tried would make any standup comedian envious. They erupt from the gallery, as if on cue, each time the state prosecutor, Valery Lakhtin, opens his mouth. Even if he weren’t facing the intimidating task of prosecuting the country’s most famous fallen oligarch, the gangly, intellect-challenged bureaucrat representing the Russian state would have a tough time. He appears to lack an understanding of the simplest economic principles — not to mention legal arguments. Challenging an objection from the defense this week, he countered with the unimpeachable point: "Prosecutors can’t lie!"

The past week, however, after 16 interminable months of Khodorkovsky’s latest trial, on charges of embezzlement and money laundering, saw some interesting developments. For the first time since the fallen mogul was arrested in 2003, top Russian officials have taken the witness stand. Even more striking is that their testimonies have supported Khodorkovsky’s defense. The question on everyone’s lips, then, is whether this is a sign that the Kremlin is softening its stance, or simply a new twist to Russia’s most infamous show trial.

Khodorkovsky, one of modern Russia’s original robber barons and the former head of Yukos, is nearing the end of an eight-year sentence on charges of fraud and tax evasion. Prior to his imprisonment, he was one of the wealthiest men in the world and a persistent thorn in the Kremlin’s side, doling out tens of millions of dollars to opposition parties and pro-democracy organizations. In October 2003, however, he finally pushed then-President Vladimir Putin too far and was summarily arrested. Ever since, he has kept up a constant stream of criticism from his jail cell, corresponding with foreign and Russian journalists via smuggled letters. He is due to be released in October 2011 — just five months before Russia’s next presidential election. That might be a bit awkward, so he’s now facing a further 22 years in a Siberian prison, accused of ordering the siphoning off of 350 million tons of oil and laundering nearly $25 billion in proceeds from 1998 to 2003.

Khodorkovsky, who maintains a six-person defense team but questions witnesses himself, frequently reminds the court that evading taxes (the first charge) on embezzled oil (the second) is not only illogical but impossible. The judge, like clockwork, strikes every such statement from the record.

On June 21, however, Khodorkovsky finally won a key argument when German Gref, the state-appointed head of Sberbank, Russia’s largest bank, and long-serving economy minister during Putin’s presidency, took the witness stand. Gref, associated with the "liberal" clan of the Russian elite that also produced current President Dmitry Medvedev, appeared at ease, tan, and calm, as he faced questions from Khodorkovsky.

But after three hours of technical back and forth on oil-pricing mechanisms, tax policy, and the relationship between subsidiary firms, Gref admitted that the evidence against Khodorkovsky was weak. "If such embezzlement had been discovered, I would have been made aware of it," he said.

The following day, Trade Minister Viktor Khristenko, whose portfolio included energy under Putin’s presidency, was called before the court. He, too, conceded a critical point during his questioning. "The physical theft of oil from the system is possible," said Khristenko, "but I’m not aware of the theft of a million, or millions of, tons."

The very fact that high-ranking Russian officials were even allowed to appear is striking. The court has long denied Khodorkovsky the right to question the officials who witnessed or took part in his downfall. The court has refused repeated defense requests to call Putin, now the prime minister, as well as Igor Sechin, his deputy, whom Khodorkovsky has accused of orchestrating the campaign against him. (Rosneft, the state-owned oil company that Sechin chairs, emerged the big winner from Yukos’s downfall, taking over its production assets at knockdown prices after the company was forced into bankruptcy.) Alexei Kudrin, Russia’s powerful finance minister, has also refused to appear.

Putin’s spokesman, Dmitry Peskov, denied any orchestrated effort to keep government officials from testifying. "When you are called to court, you have to go as a citizen," he said. Yet few think that Gref and Khristenko would have agreed to take the stand without checking with the Kremlin first. These unusual admissions — from the two men directly involved in government oversight of Yukos’s activities — should bode well for the defense. In a U.S. court, the prosecution might well concede. But this is Russia.

"Nobody believes that this trial is about a fair competition between the prosecution and the defense," Masha Lipman, an analyst at the Carnegie Moscow Center, said in an interview. "This is a political trial and the decision has got to be political."

With elections just over the horizon, the sooner this decision comes, the better. Medvedev and Putin have both said they have yet to decide who will run for president in 2012, and members of Russia’s siloviki clan — those with security services backgrounds who favor strong state involvement — are said to be nervous about the country’s newfound liberal streak.

An April study by the Levada Center, an independent Russian pollster, found that despite zero coverage on state-run television, 44 percent of Russians were aware of Khodorkovsky’s trial — up from 33 percent one year before. Khodorkovsky, who amassed enormous wealth during Russia’s shady post-Soviet privatizations, is not loved in Russia. But neither is Russia’s politicized justice system, which Medvedev has vowed to reform.

"[The state] has painted itself into a corner," Lipman said. "Either they have to end this farcical trial with a complete travesty of justice and sentence him to a crime that seems totally absurd, or make a decision and let him walk. This is a difficult decision to make, but the time of reckoning is getting closer."

For now, the former tycoon’s supporters are cautiously optimistic. In what will be taken as another encouraging sign, prosecutors on June 24 dropped a separate case against Vassily Aleksanyan, a former Yukos vice president and close Khodorkovsky ally who was detained three years ago on charges of money laundering and embezzlement. Sick with cancer and AIDS, he was released on $1.7 million bail in January last year, following an outcry from rights activists. Still, imagining a free Khodorkovsky — a man for whom Putin is widely thought to harbor a personal hatred — seems impossible.

Inside the trial, the absurdity continues, as it has nearly every day for the past 16 months. On June 22, it ended with Lakhtin, the prosecutor, screaming like a petulant child: "Khodorkovsky is bothering me as usual! He’s not letting me ask any questions!"

Khodorkovsky responded with a rare show of anger, growling that the prosecutor was "directly lying." The judge rolled his eyes. Khristenko, the trade minister, stared at the ceiling, in seeming disbelief at what he had gotten himself into.