In Panic, the Siloviki Revert to Blood Libel

nevzlin022008.jpgRussia’s finance community is officially head-over-heels in love with the president-to-be Dmitri Medvedev, whose soothing promises of legal reform and liberal institution building are music to their ears. A recent note to clients of Alfa Bank, for example, was boldly optimistic, effusively promoting Medvedev’s recent economic policy speech, stating that “given the format in which they were delivered, these priorities are not idle talk, but rather a declaration of the policy to be seriously approached for years to come. Even partially attained, they would significantly improve the sustainability of Russia’s long-term growth.” What the bankers fail to mention is that during that same speech, Medvedev said that he would focus on “ensuring the independence of our legal system from the executive and legislative [branches]” and reduce the practice of “raiding” by state officials to force private businesses to sell assets at reduced prices. Sounds great, right?

So if Medvedev really means what he says, as the bankers claim, then we can expect some desperate maneuvering from the siloviki to box the new leader in, constrain his options, and, if possible, implicate him with their misdeeds in order to maintain impunity. In my view, this is precisely what we are witnessing now with the renewed attacks on the Yukos prisoners in the lead-up to the elections and, most recently, the “blood libel” against Leonid Nevzlin, who has suddenly been accused of ordering two contract killings between 1998 and 2002.Nevzlin is no stranger to trumped-up accusations. Resident in Israel now since 2003, the former executive has seen all variety of allegations from the prosecutors, which most observers have dismissed as politically motivated. In 2004, the Kremlin briefly sought to arrest him under murder charges, but, like many other false investigations, we heard little news of the case since (bear in mind that the authorities have tried implausible murder charges against many others in the past – as Khodorkovsky said in his recent interview with the FT, “The accusations are connected not with a crime, but with a desire.”).However, now more than three years later, and conveniently just weeks before Medvedev’s election to president, the procuracy has announced that they have “completed” the investigation of the Nevzlin murder charges, and have submitted the case before the Moscow City Court for a show trial in absentia, where Nevzlin will likely be falsely convicted of murdering Valentina Korneyeva and Nefteyugansk Mayor Vladimir Petukhov. What no one seems able to explain is why now: if the Kremlin had a credible murder case to hold against Nevzlin, why would they wait so long to bring it to court?As Bret Stephens wrote in the Wall Street Journal earlier this week, “the Yukos case shares some of the notorious characteristics of a Soviet purge, particularly the effort to manufacture a “conspiracy” by bringing charges against a wide array of individuals.”While the attempt to create this “conspiracy” can be easily observed, in addition the siloviki and their prosecutors are trying to create a fait accompli for Medvedev and Putin while they are focusing on the transition. It is unlikely that anyone will step in to stop the Nevzlin murder trial from going forward. Having Nevzlin convicted of murder, no matter how frivolous and implausible the evidence (and no one expects the prosecutors even to try very hard building a fake case), helps to strengthen impunity for the most corrupt elements within the Kremlin.Those behind the takedown of Yukos seem desperate to secure the convictions they need before any possible housecleaning operation is launched by the new president. They are motivated by panic – knowing that they don’t legally own most of their assets.Those who used the legal system to steal Yukos and other private property – those who have abused their position of power within the government for self-enrichment – are very eager to tarnish the next president’s record, and make it more difficult for him to root out corruption. So while we observers really like what Medvedev has been talking about, and we all certainly hope he is successful in re-establishing rule of law, analysts and the money men would do well to remember how the loose ends of the Yukos heist continue to threaten the executive’s ability to make the necessary changes to guarantee stability for Russia’s future.