Russia's political system under Putin has led to increasing political risks for investors, as seen in the Khodorkovsky affair. The lack of an independent judiciary, corruption, and arbitrary application of laws against political opponents allowed Putin to dismantle Yukos and imprison Khodorkovsky. This raised Russia's country-specific political risk profile and damaged its investment climate.
11. THE END OF CHAOS Dec. 31, 1999 - Yeltsin resigned his Presidency
12. WHO is Mr. PUTIN? Lawyer from Leningrad State University Former KGB Officer 1994 First Deputy Mayor of St. Petersburg 1998 Director of the Federal Security Service (KGB) 1999 PM of the Russian Federation 2000 President of the Russian Federation
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14. PUTINISM The political system under Putin: “Vertical power” Chekism (KGB runs the country) Kleptocracy Cronyism Nepotism Corruption Cult of personality
15. CRITICISM Russian Apartment Bombings in 1999 War on terrorism (Chechnya) Human Rights Abuses Kursk, Nord-Ost, Beslan disasters Relations with former Soviet Republics Control of the media = Control of elections No challenges to the Kremlin are allowed: Murder of Paul Klebnikov (2004), A. Politkovskaya (2006) Toxic poisoning of Alexander Litvinenko (2006) Sergei Magnitsky (2009) tortured to death Bill Browder CEO of Hermitage Fund deported from Russia
19. KHODORKOVSKY’S AFFAIR 1986: Chemistry Student in Moscow Mendeleev Institute 1990: Founder and Co-owner of MENATEP - INVEST bank 1995: CEO and principle shareholder of YUKOS (“loans-for-shares privatization”) 2001: Founder of ”Open Russia Foundation” Khodorkovsky: -Russia’s richest person(net worth: $15bln. ) -16th wealthiest person in the world
24. $10 bln for 2002Sentenced to 8 years together with Platon Lebedev
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27. 3 days later, state-owned Rosneft buys Baikal Finan. Group“ Scam of the year” – acquired by the state-owned oil company Rosneft
28. KHODORKOVSKY’S AFFAIRStylinesque Show Trial - Part 2 New charges contradicted the facts New sentence: additional 7 years in jail Former PM Mikhail Kasyanov reaffirmed Putin’s involvement in the case March 2011- scandalous testimony of Natalya Vasilyeva & Igor Kravchenko
29. KHODORKOVSKY’S AFFAIR REASONS? Political Rent seeking Renationalization(Putin’s National Champions) Xenophobic nationalism (deal with Exxon Mobil, Oil pipeline Angarsk-Dacin – USA)
30. YUKOS AFFAIR AFTERMATH MICEX suspended for one hour; down 13% Central Bank intervention to restore Ruble RTS index down 10% Yukos shares on the RTS down 15.4% FDI fell 13% Massive capital flight Bad investment climate
41. As Robert Amsterdam said: “Khodorkovsky’s Affair is a global problem. When the government of the country decides it is above the law – no one is safe in Moscow, no one is safe in Berlin nor anywhere in the world.”
42. As Martin Niemoeller, a pastorof the German Church, observed: “In Germany, the Nazis first came for the communists, and I did not speak up, because I was not a Communist. Then they came for the Jews, and I did not speak up, because I was not a Jew. Then they came for the trade unionists, and I did not speak up, because I was not a trade unionist. Then they came for the Catholics, and I did not speak up, because I was not a Catholic. Then they came for me... and by that time, there was no one to speak up for anyone.”