Putin's Sham Justice Gets European Court's Approval

The European Court for Human Rights has done Putin a favor by ruling that Khodorkovsky's conviction for tax evasion was not politically motivated.

Mikhail Khodorkovsky, once Russia's richest man and now the country's most famous political prisoner, has long been a nuisance to President Vladimir Putin. Now, an unexpected source is helping Putin make the case that one of his most potent critics deserves to be behind bars.

On July 25, the European Court of Human Rights -- the international court of last resort for all Europeans, including Russians -- ruledthat the 2005 conviction of Khodorkovsky and his business partner Platon Lebedev for tax evasion was not politically motivated.

"The accusations against the applicants had been serious, and the case against them had had a 'healthy core,'" the court explained in a press release. "Thus, even if there were an element of improper motivation behind their prosecution, it did not grant immunity from answering the accusations against them. Nor did it make the prosecution illegitimate 'from start to finish,' as alleged by the applicants."

Khodorkovsky and Lebedev, once major shareholders of the oil company Yukos, were arrested in 2003 on charges that they employed illegal tax-avoidance schemes, such as transferring profits to shell companies in low-tax areas and paying their own salaries as consulting fees. Most if not all large companies in Russia used similar methods at the time. A bookentitled "Why Khodorkovsky Went to Jail: Tax Schemes That Are Not Worth Imitating" became a bestseller soon after the verdict. A major cleanup of corporate tax practices followed throughout Russia. Yukos, rudderless and burdened with enormous tax bills for previous years, failed. Its assets were acquired by state-owned Rosneft.

Khodorkovsky was seen by many as an enemy of the Putin regime rather than a tax evader. In 2002, he was #101 on Forbes magazine's global billionaire list with a fortune of $3.7 billion, and he was using the fortune freely to buy political clout. He financed opposition parties and parliament deputies, wielded enormous influence in Yukos production regions and publicly argued with Putin about energy policy. It was easy to see why he was singled out for a show trial. It was the selectiveness of Putin's justice rather than its "healthy core" that made the case political.

In retrospect, the logic of Putin's actions is transparent. He could have used similar charges to jail all the "oligarchs," businessmen who had built vast fortunes under Putin's predecessor, Boris Yeltsin. That, however, would have meant overturning the mass privatization of the 1990s and redistributing property on a grand scale. Putin could not afford such upheavals in the early-to-mid 2000s. Instead, by making an example of Khodorkovsky, he showed the oligarchs that they were holding their assets on the Kremlin's behalf, rather than enjoying the full rights of ownership. After the wealthiest of them went to jail, they were always ready to put up cash whenever Putin required it for some project or other.

While in prison, Khodorkovsky, who has never admitted his guilt, matured as a political thinker and wrote a number of well-received articles on the future of Russia -- a development that probably hardened Putin's resolve to keep him in jail. In 2010 he received a new sentence for allegedly stealing oil from Yukos subsidiaries. His lawyers are also appealing this case to the European Court of Human Rights. It is likely that here, too, the judges will find a "healthy core:" Khodorkovsky's treatment of Yukos subsidiaries' minority shareholders was not always fair. Yukos bought oil from the subsidiaries at low transfer prices, which the court interpreted as theft.

Khodorkovsky is due to serve out his sentence by October 2014. It is far from certain that he will go free then: Investigators in Moscow are said to be working on a third case against him. The former oil magnate has lost most of his fortune and has said that he is prepared to languish in prison for the rest of his life. If he is ever released, it will not be thanks to the European Court. All the judges in Strasbourg have been able to do for Khodorkovsky is award a laughable 10,000 euros in compensation for a number of procedural violations they found in the conduct of his first trial.

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    To contact the author on this story:
    Leonid Bershidsky at lbershidsky@bloomberg.net

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