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Mikhail Khodorkovsky: Rockefeller had it Much Harder
// This was what the owner of YUKOS thought 15 months prior to his arrest
Oligarch-2002
This interview was taken by Kommersant's special correspondent Natalia Gevorkyan in June 2002. The interview was not published because the interviewee was too outspoken. At any rate this was how Mikhail Khodorkovsky's press service explained his request to postpone the publication sine die. As time passed the interview lost its relevance. Today when the Meshchansky Court announced the sentence to the former head of YUKOS we received his permission for the publication. As for the interview's relevance, Kommersant's editorial board thinks that to refresh the point of view on the status of a major Russian businessman that was topical some three years ago would be good not only for Mikhail Khodorkovsky - and even not only for the oligarchs.
Which risks does big business in Russia face today? Gangsters won't dare to “assault” such a company as YUKOS anymore, will they? What about the state?
There is no doubt that the state can easily destroy us but this will denote the change of the social structure. The last time I reported to the president (apparently it is the meeting of the president of the RF with businessmen on May 23, 2002 that is meant here; the last bilateral meeting between Vladimir Putin and Mikhail Khodorkovsky prior to the interview took place on March 14, 2002. - Kommersant) I said that there was nothing that threatened big business in the existing scheme of the social development.
Still the state can destroy the company if it decides so, cannot it?
In any country of the world. Contemporary business is deeply integrated into the society and in case the society decides it wants to live worse it can easily destroy business – no problem.
A normal society is rational, isn't it? Why would it want to destroy business? This is not pragmatic.
You are quite right – it is not. This is true in application to our society as well.
Why does it happen then?
There exist falsely understood interests. Let's take Argentina, for example. Why do they crush shops there? Because of resentment.
“Our Struggle for Business Ethics is of Mercenary Character”
They write about you and YUKOS much more in the West than in Russia. The situation was the same three-four years ago but back then the publications were negative. Whereas now they are only positive. This strongly resembles “promotion” in the West. Has the time come?
It is a bipartite situation: we have changed and the attitude of the West has changed. If we take the time when business began things were pretty clear: one should abide by the laws but there are no laws.
Or there were laws but with loopholes.
Which means there were none. So people did what they wanted. These were the conditions under which the original accumulation of capital took place. We did shape some moral requirements to ourselves but those were our moral requirements so we should not even mention them today. They corresponded to the society we lived in. Then gradually the legislative field began taking shape, we continued functioning in its boundaries but it was still quite wide. Which it remains today by the way.
Then the attitude of the West towards the Russian oligarchs (including you personally) should have remained unapproving-distrustful to put it mildly. However, just recently you have met with Koffi Annan, you have established a foundation in London with Lord Rothschild and Henry Kissinger on its board of management. It seems as though everybody has forgotten that just recently they have called you a “sly Komsomolets”.
We have come to understand that there exists a different perception of legislation in the West. Apart from that they have certain rules – in business as well – that are called to make life normal. Since pickling money in banks is not an end in itself and one wants to have a normal life, these rules are not superfluous. Even if tactically speaking they sometimes hamper in work, in the medium-term perspective they do help to live.
Have you become an admirer of the Western legislation?
But not its apologist. Besides, you know, we have grown up.
There is no doubt about that. Just some ten years ago or so you were earning on the side working as a carpenter if I am not mistaken.
That's right.
You have brought up the subject of business ethics. However, it is now that you have become quite wealthy. And there are some who are just starting out as you were ten years ago. I doubt it that you could persuade them that they should live according to Western rules.
You are right. It is not only in the West that people pay attention to the means we use and to the means we have dropped. People here have sensed it as well. They say: you accumulated your initial capital when everything was allowed and now you want to have everything that you could do banned and the situation stabilized. You are O.K. and, according to you, we cannot resort to the methods of original accumulation of capital that you are well familiar with. I have to agree with that. It is indeed so. As any generation that has passed from the youth to middle age we start performing a stabilizing function. Yes, indeed there are young wolves who would like to resort to the experience of the end of the 80-s - the beginning of the 90-s…
And I can understand them. They look at the “older fellows” and see that this experience is practically inestimable. And here you are trying to hinder them.
Trying to oppose them. Indeed, you are right. This is good for us and bad for some of them. But what about the society in general? The whole world viewed Russia of the end of the 80-s as a wild place, these methods being one of the reasons.
It still is.
Not quite so. Russia is not a wild place for business otherwise our rating would not be approaching the investment one. If our actions bring Russia back to that epoch the whole society will become poorer. Because in such case our money becomes more important for us; there will be fewer investments; risk premiums for work here, for supplies and purchases will increase. This means that objectively speaking we all become poorer, every member of the society – not just oligarchs or young wolves. Well, let's suppose that some want to keep what they have and others want a breakthrough. These are dozens, thousands of people at most. The remaining millions simply want to have a normal life. This is why we are trying to embrace the norms suggested by the Western society.
Could you be more specific?
Democracy, transparency, social responsibility of business, corporate citizenship – these are quite clear things. Of course, to some extent our struggle for business ethics is of mercenary character. Yes, we do profit from that. Yes, this is unprofitable for some our rivals who have failed to break through so far. I will repeat though that in general today the whole society benefits from our position.
Listen, almost every day “the whole society” learns about another businessman murdered here or there. I don't know if that is a sign of another redistribution of property. However, with ethics or without ethics life according to criminal rules continues.
Of course, but let us consider the following. Big business outstrips the whole of the Moscow business by five years. The Moscow business outstrips the regional business by another five years. A ten-year difference. At the time when we were setting up big business here they still had socialism there. This is why the layers we compare should be territorially and economically identical.
However, in this case because of your rules, which are new for Russia, you run the risk of finding yourself in a serious breakaway from the others - and possibly in isolation.
Someone should be looking further than the others demonstrating with their own example that it is not only possible but even better to live normally. I am not trying to prove that we are Mother Theresa's followers…
It is hard to blame you for that. The term “money laundering” is quite widely used. However, apparently there exists the notion of “image laundering” as well. It was not for nothing that in your interviews in the West you mentioned Rockefeller as an example for imitation. However, Rockefeller “got laundered” only in the third generation – it was only his grandson that became “clean”. There were 100 years separating him from his grandfather. And it seems as though you would like to race through these 100 years during your lifetime.
I sure would. This is an objective requirement in business – the one who is faster will win. You are not surprised by the fact that the way from a horse to a railroad took thousands of years whereas from a railroad to a spaceship – only one hundred years. The same applies to the Rockefeller issue. I was in Harvard and heard the director of their business school speak. He said that Khodorkovsky was Rockefeller, Rockefeller's son and Rockefeller's grandson in one person. Rockefeller had it much harder. Back then there were no ready rules. It took a hundred years to create business ethics. It took them three generations. It is easier for us. We simply should open…
The books?
First our gates and then our eyes. This is something you won't find in books. The situation changes quite rapidly and these norms change too. They are not frozen. Let's take the problem of corporate management – it did not exist some 40 years ago. The problem of corporate citizenship emerged in the past 20-30 years. We simply need to embrace these norms and become closer to these positive externals through frequent trips to the positive environment.
But afterwards you return to the negative environment, don't you?
You are right. This is the reason we have taken up issues of education. The youth is the layer that embraces positive environment best of all. They are prepared to apprehend, they have no burdens.
You mean to say that you are doing good for selfish reasons too?
To some extent.
“This was the Point of Time when I Identified with Putin.”
What is the attitude of the West to you personally? Are they prepared to receive you whatever you are like because Forbes has reckoned your fortune as being $ 2,4 billion and has called you the wealthiest person of Russia? Or do they have some suspicions? Or maybe they pay attention to everything – ranging from your conduct and upbringing to your clothes and watches?
The Western world has many segments and it would be wrong to say that they all perceive me in the same way. Some value the opinion of Forbes. Others don't care about it. There is a different thing that is of interest. Some time ago western companies thought that they would do us a favor if they struck a deal with us. Then they thought that if it was not a favor it was still a gift and they could count upon some gift in return simply because they had come to do business in this wild country. In the past year the situation drastically changed. I had several deals prepared with Western companies that I had some doubts about – they looked as misbalanced to me. In other words non-standard conditions were required from us as Russians that were not accepted in the international practice. I brought those issues up at the board of directors. At present one third of the board consists of foreigners – serious ones.
I have heard that they have substantially increased the company's capitalization.
That's not right. An independent board of directors is one of the factors that increase the company's capitalization. So it was then that I saw real benefit from them… I told them: look, there are deals that do not correspond to the norms of the Western business practice because they require asymmetrical conditions from us. However, maybe since we are a Russian business we should accept these conditions of the Western company otherwise it would not go for a deal with the Russians? Our board bridled (its American and European members in particular): “Why should we? The shareholders won't understand you. You should make no discounts or go for additional concessions because you are a Russian company. You have a good financial situation, standard audits, you function according to international standards.”
During the past year and especially after September 11 they began perceiving Russia as a normal country. By the way, this was the time when I strongly identified with Putin. It does not happen often with me.
“The Probability that Khodorkovsky will Disappear in Just a Moment is Less than in the Case of Aksenenko.”
Do you feel protected in your country?
Of course no. As a person – absolutely no. I think that the country's present judicial system and the contemporary law-enforcement system fail to protect an individual.
How about property?
No. The present generation is not prepared to treat private property as an absolute basic value.
Image?
Less in terms of personal security and more in terms of approach towards private property as an absolute value. I have said already that it is not for nothing that we are working with the youth. Those who are 30 today are prepared to perceive private property as an absolute value. If we win in the struggle for the new generation in 20 years everything will be O.K. Those who are 30 today will be 50 then and they will be the ones who will determine the movement of the country. That's for sure.
Actually we have counted quite a number of risks. Is big business really all that invulnerable as you reported to the president? Let's take Mr. Aksenenko for example (in January 2002, Nikolay Aksenenko was dismissed from the office of the Minister of Railways and at the time the interview was taken he was under investigation; presently Aksenenko is under treatment abroad. - Kommersant). Quite an oligarch. In power into the bargain. Former candidate to presidency into the bargain. He was gone in just a moment. The risk that in just a moment there will be no….
…Khodorkovsky? I think that the probability that Khodorkovsky will disappear in just a moment is less than in the case of Aksenenko. The nature of property is different. In that case everything was too simple and clear. The situation has changed, hasn't it? Earlier it was like this (snaps his fingers. – N.G.) and there was no YUKOS. Today (snaps his fingers again. – N.G.) – and there is no Khodorkovsky is still possible. However, not in regards to YUKOS… No, it is unlikely. The society has become too pragmatic to understand that the loss of a major business is a big loss for every person. After all it is three percent of the GDP, isn't it?
Well, I would not say that this approach would help to save anybody in Russia… According to all experts, the decision of the court on the TV-6 is quite transparent and is in no way connected with business. Whom did it stop?
Why are you proving this to me? Don't try to convince me that the political pressure upon mass media is a gross error.
It is the issue of guarantees of security for business that troubles me most of all in the context of our conversation. Everything is clear with the courts. To everyone. So the question is what or who is the guarantor of security?
Please, notice that even the situation with the TV required a lengthy and a thorough court investigation. Maybe for our society, which is still quite hungry, the notion of spiritual values (on the creation of which independent television is working) is not a top-priority issue. I am not talking about any specific individual right now. A specific president of the country or a prime minister is for certain reasons prepared to go for the destruction of the business that manufactures creative mentality. However, as of today everybody understands that major companies, which produce a substantial part of the gross domestic product and are shaping a substantial part of the budget and are successfully developing in the country, are not a frequent phenomenon. And in general they are not that numerous. It is clear that both people inside the country and foreign investors are watching this. It is clear that it is on this that people depend for a piece of bread today and tomorrow. Depend right now, not some time in the future. We have not arrived at the “some time in the future” yet. Whereas we have arrived at the “depend right now” already. I suppose that this is why we are not the most pleasant company for the president. But this realization does exist. This is why even if he does not really like our company he does meet with us and inquires what it is that hinders us. He not only asks but also does something about it. Once again, I doubt it that he likes us personally and that he has the warmest feelings towards us.
Does it appear to be like that or is it what you actually see happen?
It appears to be like that.
How about these ethical norms in the relations between the oligarchs? It is kind of strange to see them strangling each other.
We are working on shaping them at present. My personal opinion is that with the exception of one quite peculiar individual everybody else has more or less embraced these ethics.
You apparently do not want to name this individual. Is this oligarch in the country or outside it?
He is a local crazy one.
What about the shaping of your image (in the West as well). Is that also a kind of a safety net for you inside the country?
I would put it differently. This is an additional extent of freedom.
“I actually heard Soros say: guys, it's time to push off. You will have a communist win.”
You are trying to avoid the political arena. With the exception of maybe 1996. By the way, which office would the Khodorkovsky of 96 hold in the present-day YUKOS?
On the contrary. Me of today would do the same in the 1996 politics as I did. I well remember that situation. I was a witness to the conversation between Soros and Berezovsky. In Davos there is a restaurant in the basement. They were sitting at the next table. I turned to them. I actually heard Soros say: “Many of my friends lost everything – and sometimes their lives – because they did not leave everything behind and depart. You've had a nice time, guys. It's time to push off now. You will have a communist win.” Zyuganov had a room next to mine. We mixed a lot. And afterwards I said: everything is great, he represents the outlook of dozen million people in the country, my fellow citizens whom I treat with respect as I do Zyuganov, but I do not want him to be in power in the country.
If I get it right both back then and now one of your goals is to create the most comfortable conditions for the existence of your company in the given environment.
Absolutely correct.
Does that imply an infinite extent of conformism?
That's a most interesting situation. It is reflected in Koffi Annan's nine principles that we have joined. I actually liked the idea. Business should comply with the laws of the country it exists in. Naturally so. Business should follow some moral principles of doing business. What if the moral principles contradict the laws of the country? For example, the country does damage to ecology, uses child or slave labor…
In other words living and working in the country where all of this happens you can choose to not do that in the framework of your own business?
Yes, and you do everything – and you have such opportunities – so that others would not do that either. If they make you do that though, you do no business there.
Sounds nice but in practice… Besides it is often big business that does damage to ecology. And does Koffi Annan mention anything about politics? For example, major businessman Krupp worked before Hitler, under Hitler and for Hitler. Is this extent of conformism acceptable for you?
I get your question. It is difficult. Let's lay aside some fine moments for a while. If a country behaves in such a way that embargo is imposed upon it, we will not work there. Even if we really want to. Let's consider a finer situation: there is no embargo – i.e. the world community has not defined this as, for example, fascism, - and the board decides that we will work. The company works. But as a person on staff in the company I have the right to choose whether I want to work in such a country or not. I do not want to work in a fascist country.
Non-participation – at least apparent – in politics does not denote that you are indifferent towards the situation, does it? I have read somewhere that you finance the SPS newspaper.
Newspaper? I do not know. We give money to SPS, to other…
Will you finance the opposition if it emerges?
What do you mean? We finance the rightist.
But the rightist are not the opposition at present.
A whole different subject, isn't it? We do not know so far whom we are dealing with. We do what any Western company would do that keeps up the country's movement in the direction of the improvement of the investment climate. I understand it in a wide sense – this is liberal economy, democracy and stability.
You are 38 years old. Things are going well with business. Would you like to take up something else? For example politics?
You should always do what you are better than others at. I have attained much in business. I am a competent head of a company and my activity is quite highly evaluated. I will not go into the sphere where the evaluation of my activity might be worse. Anyway, this is a question of inner conviction. If I sense that I can be up to the mark, for example in international business I will go for it. The same is true about politics. Why not? Indeed, I am 38… I still have time. Let alone the fact that I have said that I will withdraw from business at 45.
“I do not Have a Plane of My Own. Sometimes I Rent it.”
Let's talk a little about the modest charisma of bourgeoisie. A quite wealthy acquaintance of mine has said that money no longer means anything to him. What about you?
Once Leonid Nevzlin and I decided: we have personal money that we are quite satisfied with. From this point of view it plays absolutely no role. And there is money for the game, an instrument. This instrument is like ammunition for the military – you barely have time to replenish it.
You often travel abroad but my friend has seen you in a shop on the Kutuzovsky Prospect. You were buying a suit. Do you prefer to buy your clothes in Moscow?
They don't have my size abroad.
Don't exaggerate your size. I seldom see you in suits. Mostly in pullovers and jeans…
I have started wearing suits lately. But if I had freedom of choice this is what I would wear – jeans, pullover, leather jacket.
Watch?
This one? Franck Muller.
Glasses? You used to have a different pair, with a golden rim.
Nothing unusual about the glasses. My wife made me stop by a shop in Switzerland and buy such glasses – rimless.
As far as I know this is you second marriage. Can it be referred to the oligarchic period?
An interesting story. It was 87 or 88. With the first major money I made I bought a three-room apartment and never set my foot in it. My ex-wife moved there. Earlier we lived in a one-room apartment.
Children?
Four. A son by the first marriage. He is sixteen. And three more: the daughter is almost 11, two infant boys – two and a half years old.
Twins?
But they look different.
Do you have bodyguards in Moscow and abroad?
Well… I do. Thanks to Forbes.
Come on! You had them before Forbes too.
What do you mean by “come on”? Thanks to Forbes there appeared a figure. People had not understood the calibre of figures. Speaking of abroad – it depends upon the place. There are countries where if you are publicly known as a wealthy individual it is recommended that you have security.
Do you fly on your own plane?
It depends. I do not have a plane of my own. Sometimes I rent it.
Do you live in the suburbs of Moscow?
Yes.
A house with turrets? This is new-Russian standard, isn't it?
You got it wrong – there are no turrets. The house was built in the Norwegian style. Wood and stone. Like they build in Norway.
If I am not mistaken you drive a BMW.
I have recently bought Cadillac Jeep. For myself. My wife can drive too. She has a Jeep. And also we have a family mini-van.
Do you go in for sports?
Yes. This year I tried to mount a snowboard. It hurt! But by the end I managed to go down the hill without falling down.
Do you have villas abroad, yachts?
No.
Why not?
I guess I did not want them.
Natalia Gevorkyan
All the Article in Russian as of June 01, 2005
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