Foreign Affairs CommitteeWritten evidence from Pavel Khodorkovsky

1. Summary

1.1 I welcome the Select Committee investigation into the FCO’s human rights work in 2011 along with the content of the FCO’s report “Human Rights and Democracy”.

I agree with its observations on Russia and recommend that future in-country reports provide a translation into the respective national languages to aid understanding and distribution.

I support a cross-government strategy on business and human rights and recommend that all Ministers travelling abroad are briefed on human rights abuses in the destination country and encouraged to raise them with their official interlocutors in that country.

I welcome the creation by UKTI/FCO of an Overseas Business Risk Service with a view to providing country-specific guidance on human rights issues in overseas markets.

1.2 This evidence is submitted by Pavel Khodorkovsky, son of Mikhail Khodorkovsky the former Head of Yukos and Amnesty International declared “Prisoner of Conscience”.1

2. Background to the Khodorkovsky Case

2.1 Prosecution of Khodorkovsky

2.11 My father, the Russian businessman and philanthropist, Mikhail Khodorkovsky, was declared a “Prisoner of Conscience” by Amnesty International2 following two politically motivated trials against him. His prosecution and imprisonment have been seen as a watershed event demonstrating the limits of freedom and democracy in Russia today.

2.12 As the Chief Executive of Yukos Oil, Khodorkovsky was heavily involved in public philanthropy and civic society; among his many projects were the creation of Open Russia, dedicated to promoting civil society values and running educational projects for Russian youth, including building a school for underprivileged orphans which continues to operate to this day.

2.13 In October 2003 he was travelling across Russia’s regions delivering speeches on democracy and calling on Russian youth to become politically engaged when he was arrested on politically motivated charges that retroactively asserted violations of tax and privatisation laws.3

2.14 There were two widely-accepted central motives behind his prosecution: to eliminate him as a political opponent and to seize control of Yukos—increasing the Kremlin’s power and enriching certain state officials.

2.15 Khodorkovsky and his business partner Platon Lebedev were found guilty on 31 May 2005 and were sent to Siberia to serve eight-year prison sentences. By October 2007, both Khodorkovsky and Lebedev would have been eligible for release on parole, but in February 2007, new charges emerged of embezzling the entire oil production of Yukos and laundering the proceeds, directly contradicting the existing court ruling of 2005 against the two men.4

2.16 In December 2010, days before the verdict in the second trial, Prime Minister Vladimir Putin said on television, (in reply to a question about Khodorkovsky), that “a thief should sit in jail”.5 Later that month, Khodorkovsky was found guilty and sentenced to a total of 14 years, triggering widespread condemnation in Russia and the West, most notably, from the US, UK, EU, France and Germany.6 The sentence was reduced on appeal by one year, pushing his release date to 2016.

2.17 The European Court of Human Rights (ECHR) currently has before it several outstanding applications from Khodorkovsky.7 In a first judgment, concerning his initial arrest in 2003,8 the Court found numerous violations of the European Convention on Human Rights. In addition, former President Medvedev’s own Council of the Russian Federation for Civil Society and Human Rights found that the “miscarriage of justice” in the second Khodorkovsky-Lebedev case was so grave and so obvious that the verdict should be “annulled through appropriate legal channels”.9 Since June 2011, Khodorkovsky has been imprisoned in Penal Colony No. 7 in the region of Karelia, near the Finnish border.

2.2 Seizure of Yukos

2.21 At the same time as Khodorkovsky was imprisoned, the Russian authorities set about expropriating the assets of his Yukos Oil Company. In December 2003, the Tax Ministry launched the first of what would become a series of extraordinary audits of Yukos’s tax payments, resulting in the company’s assets being sold at knockdown prices. As a result, the state controlled company Rosneft transformed itself from a company worth just $6 billion, into Russia’s biggest oil producer, with a market capitalisation of $90 billion—having spent a mere net $2 billion in the process.10

2.22 Yukos shareholders received no benefit—as all Yukos’s liabilities were manufactured to match the fire sale prices. American investors lost nearly $7 billion11 and the illegal expropriation of Yukos is now the subject of numerous legal proceedings around the world.

2.23 Khodorkovsky and his family are not involved in any litigation to secure the restoration of or damages for the expropriated Yukos assets having publicly declared that he waived any of his personal interest in the company.

3. Content and Format of the FCO’s Human Rights and Democracy Report

3.1 I very much welcome the publication of the FCO’s Human Rights and Democracy Report and the greater emphasis being placed within the FCO on the importance of human rights in the formulation and execution of foreign policy. The report provides critical support for the work of human rights organisations in Russia and has the capacity to highlight violations beyond what is possible for domestic NGOs.

3.2 Impact in Russia

3.21 I particularly welcome the section on Russia and the documented reference to the UK Prime Minister discussing the Magnitsky and Khodorkovsky cases with President Medvedev and Mr Cameron’s speech at Moscow State University in which he pointed out that the strengthening of the rule of law was essential to Russia’s future stability and prosperity.

3.22 The report’s observations on Russia were condemned by official Kremlin sources in Moscow, with Konstantin Dolgov, the Russian foreign ministry’s Ombudsman for human rights saying: “Britain’s approach to assessing the real situation in the human rights sphere in our country is not impartial and open minded. The authenticity of the information and sources used raises serious doubts”.12

3.23 But this view was countered by Dmitry Oreshkin, a former member of the independent Russian Presidential Council on Human Rights and political scientist who said: “The Russian paragraph of the UK Human Rights Report appears to be competent and close enough to the Russian Human Rights Council members’ judgment”.13 According to Mr. Oreshkin, at the meeting between ex-President Medvedev and the Russian Presidential Council on Human Rights held on 28 April 2012, members brought up the same issues raised in the FCO Report. In this way, the FCO report was able to help draw attention to the concerns of Russian human rights campaigners.

Recommendation: Much of the opposition and reform movement in Russia, including NGOs, have limited resources and therefore I recommend that the country sections of the report should be translated into the respective national languages to aid understanding and distribution. This would also allow information within the FCO report to bypass state-controlled media and reach citizens directly via social media networks.

4. Cross Government Strategy on Business and Human Rights

4.1 I look forward to the publication of this cross-government strategy later this year. I expect that a lack of a joined up space in which the impact of business decisions on human rights issues can be assessed has been a challenge for the Government and is likely to be a growing one. For example, when BP and Rosneft announced a share swap in January 2011, the then Secretary of State for Energy and Climate Change attended the event—despite the fact that only weeks before the Foreign Secretary had condemned human rights violations in the second trial of Mikhail Khodorkovsky; and that Yukos shareholders still had an application before the ECHR concerning the illegal expropriation of their property.14 An FOI request revealed that the British Embassy in Moscow had provided substantial support for the deal and that the Embassy was instrumental in arranging for the Energy Secretary to attend the ceremony.15 A UK Government presence on such an occasion constitutes a propaganda coup for Rosneft keen to use any opportunity to claim that their take-over of Yukos assets was legitimate.16

4.2 The Norwegian company Statoil has just announced a deal with Rosneft to drill for oil in Russian Arctic waters, following similar deals between Rosneft and Italy’s Eni and Exxon Mobil in the US. Having just recently returned from Oslo, I am aware that the deal has caused consternation in some quarters. Amnesty International’s political advisor, Beate Ekeløve-Slydal said: “There is reason to question whether Rosneft’s ethical standards are in accordance with Statoil’s, given Rosneft’s history and how it was able to secure ownership of what was once Yukos under Mikhail Khodorkovsky’s ownership.” She added: “An important element here is zero acceptance of corruption. Statoil has stressed that they make risk assessments of human rights when it comes to choosing countries, partners and projects and they expect their partners to have ethical standards that are consistent with their own….. Amnesty International is committed to holding Statoil responsible for the ethical standards it has always maintained it stands for, and these must be complied with in practice if they are to have any value”. It is quite clear that the Norwegian Government has concerns that the Statoil deal may suffer the same fate as the BP deal outlined above. But further consideration should be given to the scrutiny attached to deals between companies that give rise to human rights issues—perhaps by encouraging greater shareholder activism.

4.3 I also have concerns about the need to give UK businesses clear and balanced advice about the risks run by investing and doing business in Russia. The campaign against Khodorkovsky was a seminal event from which it became clear that in today’s Russia the authorities could and would act with impunity outside the law, even in full public view. An alarming string of cases of murder, torture and arbitrary detention of perceived enemies of the regime followed. Meanwhile, state-assisted raiding of businesses that refuse to pay bribes—or that become too successful for predators to resist expropriating them—is now commonplace. Corruption levels are high, with Russia scoring 2.4 out of 10 on Transparency International’s Worldwide Corruption Perception index—worse than Iran, Syria, Sierra Leone and Pakistan.17 One in six18 Russian businessmen has been on trial and approximately one-fourth of the 900,000 inmates in Russian jails in 2010 were entrepreneurs, accountants, legal advisers, and mid-level managers—many of whom were victims of abuse of the criminal justice system through fabricated cases.

4.4 The front page of the UKTI website on Russia starts with the following description:

“Russia is the UK’s fastest-growing major export market, and the third-largest export market outside Europe and North America, with favourable cross-sector opportunities, some unique in scale. The government’s economy modernisation and infrastructure development agenda, underpinned by 140 million consumers’ appetite for quality services and goods produces a need for international expertise and products”.19

4.5 The same front page offers no warning about the pitfalls of doing business in Russia and the possibility that some business activities in Russia could cause companies to fall foul of the requirements of the UK’s Bribery Act, a criminal infraction, punishable with a prison term in the UK. Corruption is mentioned in the “Overseas Business Risk” section, but little prominence is given to the siren warnings that the assessment includes, such as that “corruption is endemic in Russia” and a “major barrier to business”.20

4.6 I am aware that the FCO is soon to re-launch its “Business and Human Rights Toolkit” which is aimed at offices and officials overseas and gives advice on how to encourage businesses to meet their responsibilities in this regard.21 The FCO also publicly endorses the UN Special Representative on Business and Human Rights.22 I further welcome the imminent launch of the cross-governmental strategy on business and human rights, focusing on advice to businesses.23

4.7 However, given the example of the endorsement of the BP-Rosneft deal I have concerns that the strategy will resolve the problem of co-ordinating human rights policy between different government departments, as was expressed in the report of the Joint Human Rights Committee of 2010.24

Recommendation: All UK Ministers travelling abroad should be provided with a specific briefing of human rights violations in countries identified by the FCO as problematic and given explicit instructions to raise concerns with their official interlocutors in those countries. When the Prime Minister or the Foreign Secretary visit Russia, it is often left to media scrutiny to compel ministers to tackle human rights abuses. The Government should institutionalise arrangements so that all Ministers are raising the issue from the perspective of their own department, such as the Trade Minister and the impact on foreign investment and DECC Ministers with regard to the expropriation of Yukos when dealing with energy companies and deals. I also welcome the creation by UKTI and the FCO of an Overseas Business Risk Service with a view to providing country-specific guidance on human rights issues in overseas markets.

25 May 2012