Memorandum by Amsterdam & Peroff,
Barristers/Solicitors, on behalf of Mr Mikhail Borisovich Khodorkovsky
1. As International Legal Counsel to Mikhail
Borisovich Khodorkovsky I respectfully submit the following in
response to three of the questions posed in the Call for Evidence.
How successful have the EU's wide range of cooperation
and assistance programmes been in attaining their stated objectives,
especially in the fields of foreign and security policy; and rule
of law, democracy and human rights? What potential is there for
the EU's new cooperation and financial assistance instruments
to be effective in Russia?
2. Despite a significant investment on the
part of the EU in cooperation and assistance programmes, since
the last Partnership and Cooperation Agreement there has been
a decided change for the worse in Russia, particularly at the
top levels of political power. Militarily, Russia is more menacing
now than at any time since the Cold War and Europe is particularly
vulnerable to Russian state-controlled enterprises with regards
to its energy industry. Democratic reform appears to have ceased
and in fact reversed with NGOs under threat and the restrictions
on the press at their highest since the Soviet era, in many cases
leading to self-censorship. It is, however, on the rule of law
on which I would like to focus.
3. The power to prosecute has become the
instrument of choice in the Kremlin's means of achieving its desired
political and commercial outcomes. The Kremlin wields great influence
through the constant threat of heavy-handed intimidation and unfair
incarceration and expropriation. Multiple grievous violations
of the Constitution of the Russian Federation have accumulated
in recent years, making a mockery of its primacy in the Russian
legal system. Numerous other Russian laws have also been disobeyed
by the authorities, as have obligations under international treaties
and conventions.
4. Russian courts are subject to political
interference. Judges exposed to such extrajudicial pressures are
often forced to find means to decide a case in favour of the party
applying the pressure. As a result, Russian courts are widely
believed, inside and outside of Russia, to be far from impartial,
particularly in cases where major political or financial interests
are involved.
5. The Kremlin exploits legal mechanisms
not only domestically, but is increasingly seeking to do so internationally
as well. Moscow is eager to settle scores with certain high-profile
exiled business leaders who have vexed the Kremlin for not bending
to its wishes, and who continue to frustrate the Kremlin through
their attempts to influence events in Russia from abroad. Among
the prime targets are former Yukos employees.
6. Their record shows that Russia's prosecutors
do not deserve our automatic trust. International cooperation
with Russia's prosecutors depends upon Russia having an independent,
properly functioning prosecutorial system. To comply with requests
from Russia's prosecutorial system demands that it meet minimum
levels of modernity, justice and legal rigour. All are sorely
lacking. In light of the heavily politicised prosecutorial system,
such requests must be carefully scrutinised on a case-by-case
basis.
7. In a landmark decision issued in August
2007, the Swiss Federal Tribunal ordered Swiss authorities not
to cooperate with their Russian counterparts investigating ex-Yukos
officials. The Tribunal ruled that the Russian proceedings were
politically-motivated and in violation of law, and that Swiss
cooperation would be tantamount to complicity in the illegalities.
This was a major rebuke to the Kremlin, which had sought to portray
the Yukos prosecutions as legitimate.
8. A series of events in 2006 and 2007 have
further blackened the Kremlin's reputation in matters of the rule
of law. Through the betrayals of foreign energy majors with interests
in Russia, notably BP and Shell, and the bullying of trade partners,
whether Ukraine, Belarus, Georgia, Poland or the European Union,
the Kremlin has deeply undermined its reliability as a business
partner. Additional worrisome trends are evidenced by the xenophobic
and unconstitutional roundup and deportation of Georgian citizens,
and the forced closure of Georgian-owned businesses using various
regulatory pretexts. Meanwhile, the murders of Andrei Kozlov,
Anna Politkovskaya and Alexander Litvinenko are all additional
bellwethers of Russia's atmosphere of growing lawlessness.
9. In its September 2006 report on global
governance, the World Bank ranked Russia 151st among 208 countries
in terms of political stability, democratic voice and accountability,
effectiveness of government, quality of regulatory bodies, rule
of law and control over corruption. Russia was therefore overall
in the league of Swaziland and Zambia, and just ahead of East
Timor. Russia's political stability—defined as the perceived
likelihood that the government will be destabilised or overthrown
by unconstitutional or violent means—was comparable to that
of the Philippines and Kyrgyzstan. On the credibility of the state's
commitment to policy formation and implementation, Russia was
in a group with Pakistan and Tanzania. For regulatory quality,
Russia was ranked alongside Madagascar and Senegal. Rule of law
in Russia was as effective as in Ecuador, Indonesia and Bangladesh.
10. Worldwide esteem for the Russian leadership
is at an all-time low. There is a heavy onus on the Kremlin to
earn back its legitimacy and to promote the true rule of law in
Russia and respect for international obligations. Otherwise today's
Russian leaders may well be responsible for a tailspin into anarchy.
11. Russia under President Putin today is
less stable than generally perceived. The consolidation
of power in the executive has drastically weakened all other branches
of state power. In the absence of a real separation of powers,
should discord or crisis befall the executive, the broader political
system may be unable to withstand the attendant shocks without
collapsing altogether.
12. In an open letter to Kommersant on October
8, 2007, Viktor Cherkesov, a senior public official, stated that
intensifying rivalries within the Kremlin inner circle may soon
explode into open conflict that could threaten Russia's stability.
Former Kremlin adviser Andrei Illarionov compared the infighting
to battles between feudal lords, warning that instability and
"palace coups" could result. One observer commenting
on Kremlin insiders, cited in the International Herald Tribune,
stated: "They stood together as long as they were robbing
others of their assets . . . But after dividing the spoils, they
realized that they can only expand their wealth by robbing one
another" (Arrests hint at struggle for power after Putin,
10 October 2007).
13. The ruling clique's desire to maintain
power is based in strong measure on insecurities resulting from
its multi-year attack on the rule of law. Members of this clique
will avoid a real democratic transition at all costs in order
to protect their actions from review and redress.
14. According to the Indem Foundation, businesses
paid officials in Russia a total $33.5 billion in bribes in 2001—growing
almost tenfold to a staggering $316 billion in 2005. In 2006 Russia's
own procuracy, slightly more optimistic, estimated graft at $240
billion per year—almost equal to the state's entire revenues.
This endemic corruption is not only a hugely burdensome tax within
the Russian economy—it has also destroyed accountability
across a public administration taking its cues from a Kremlin
that flaunts the rule of law at will.
15. Without advocacy for the rule of law,
there will not be progress in Russia. Due to the suppression of
truly effective political pluralism in Russia, such advocacy will
not arise internally. Therefore, without external pressure, an
autocratic clan-based system will not generate of its own volition
any positive developments with respect to human rights or the
rule of law. Therein lays the challenge and the responsibility
of the EU today. The window of opportunity to influence developments
within Russia is rapidly closing, and the EU should not fail to
rise to make every effort to do so.
How can the EU contribute to managing relations
between individual EU Member States and Russia? Have the Member
States shown solidarity when under pressure from Russia? Is there
a need for a greater unity and coherence of approach among the
Member States towards Russia?
16. We have learned that in addition to
being a commodity essential for our continued economic development
and well-being, energy can be wielded against us as a political
or foreign policy tool. The EU can ensure that Member States work
together to address the issue of energy security. National self-interest
is the basis upon which Russia has been able to play EU Member
States off against one another, ultimately undermining the EU
as a whole. Yet this has not been the case with countries such
as Poland, Estonia and Lithuania, which have been subjected to
pressures from Russia and asked for solidarity from across the
EU. At the last EU-Russia summit in Samara, the EU, through Chancellor
Angela Merkel and President José Manuel Barroso, stated:
17. "We had an occasion to say to our
Russian partners that a difficulty for a Member State is a difficulty
for all of us at the European Union. We are a Union based on principles
of solidarity. We are now 27 Member-States. So, a Polish problem
is a European problem. A Lithuanian, an Estonian problem is a
European problem as well."
18. In this context, the EU's growing dependence
on external energy supplies, largely from undemocratic and unstable
countries, and particularly dependence on Russia, is worrying.
19. A recent own-initiative report adopted
in the European Parliament and drafted by Jacek Saryusz-Wolski,
Chairman of the Foreign Affairs committee, stated: "The EU's
27 Member States need to replace their current preference for
energy unilateralism with a new common policy of energy solidarity."
20. If the EU acts with one voice in relation
to its energy concerns, it will be able to secure energy supplies
under the best conditions for the future. However the EU will
have to muster the requisite political will to act in concert.
21. The EU is Russia's largest trading partner
and has the potential to exert a great deal of influence, through
the framework of a Partnership and Cooperation Agreement, over
the country for the benefit of its people. No one stands to benefit
more from an effective market economy and a culture of respect
for human rights and the rule of law than the Russian people themselves.
In order to reverse the disturbing trends the EU must use every
opportunity to encourage Russia to change course on human rights
and the rule of law.
What is the nature of the Russia-EU dialogue with
regards to energy questions? To what extent is Russia an indispensable
partner, rival or obstacle for the EU in its efforts to attain
the objectives of its recently adopted external energy policy?
22. The dynamics of the energy industry
have strengthened Russia's hand in relation to the EU over recent
years. Europe is becoming increasingly dependent on Russian energy
supplies and the European response has been discordant and divided.
23. Since mid-2006 Russia has surpassed
Saudi Arabia as the largest exporter of oil in the world. As stated
by Daniel Twining, major economies that are "increasingly
dependent on Russian gas and oil exports... are rendering themselves
vulnerable to the ambitions of an autocratic, imperial state that
has not refrained from using energy as a geopolitical weapon and
has been ruthless in its treatment of both internal political
opponents and neighbouring states" (Putin's Power Politics,
The Weekly Standard, 16 January 2006). Indeed, "fuel
diplomacy" has become the primary lever of Russian influence
on the geopolitical stage.
24. This influence can be readily seen in
Gazprom's appointment of former German chancellor Gerhard Schroeder
as chair of the supervisory board of the $4.7 billion Nord Stream
pipeline. Unsurprisingly, it was Mr Schroeder who, for seven years,
consistently ignored the gradual rollback of political rights
in Russia, and derailed attempts to bring unified Western pressure
to bear on Moscow to modify its conduct. Rather, Mr Schroeder
focused only on deepening Germany's commercial and political ties
with Russia. Mr Schroeder's complete absence of criticism of the
regressions of the Russian regime only buttressed the intransigence
of the Kremlin in its deflection of foreign concerns and criticisms.
25. Although less successfully so than with
Germany under Mr Schroeder, other Western governments are also
compelled to embrace Russia for its newfound influence in world
energy markets. A "business-as-usual" policy of some
governments has helped to legitimise the kleptocrats who perpetrated
the Yukos expropriation, which The Economist has characterised
as "larceny" (Russian oil—Yuk, 28 March
2007).
26. It is the non-market-oriented state
corporatism of today's Kremlin that necessitated the incarceration
of Mr Khodorkovsky and the expropriation of Yukos. By jailing
Mr Khodorkovsky and expropriating Yukos, the Kremlin cleared the
energy sector of any competitors. No one will now build competing
pipelines; no one will advocate the break-up of Gazprom; no one
will promote the corporate governance and transparency that are
anathemas to the state-owned enterprises. The costs of these Kremlin
actions are becoming increasingly evident, from mismanagement
of state resources and declines in the growth of energy production,
to the risks of reliance on an energy supplier whose political
stability depends upon one corrupt clan maintaining its grip on
power.
27. Meanwhile, the Kremlin's recklessness
was displayed with the cut-off of gas to Ukraine in January 2006
and the cut-off of oil to Belarus in January 2007. Both incidents
signalled the Kremlin's readiness to engage in energy brinksmanship
for not only commercial but also political reasons.
28. As a further example of the Kremlin's
unreliability, consider the July 2006 announcement that, despite
longstanding engagements to the contrary, Gazprom had decided
to shut out all foreign energy majors that had previously been
short-listed as potential partners in the multi-billion-dollar
development of the Shtokman gas field. Gazprom's move, nonsensical
from a business standpoint, was clear proof of the Kremlin's readiness
to politicise energy. The Shtokman developments demonstrated the
unacceptably high risk of assuming that, in dealing with the Russian
state, business sense will prevail over political whim and design.
29. Paradoxically, the law, which has been
so blatantly disrespected by the Russian procuracy both in procedure
and in substance, continues to serve as a pretext where convenient
for intimidation or control by the state. The instrumentalisation
of law so openly on display in the expropriation of Yukos has
now been replicated elsewhere, such as the bullying of BP, Shell
and PriceWaterhouseCoopers, with seemingly less and less concern
for any semblance of credibility. Extortion has been entrenched
as a method of acquisition by the state. An increasingly hubristic
Kremlin has calculated that it has space for manoeuvre in disregarding
legal and moral obligations—whether with respect to treaty
obligations, or business ventures, or commitments to send gas
and oil through pipelines without political interference.
30. As a new energy superpower, the Kremlin
has become accustomed to abusing the advantages of asymmetrical
relations, whether with domestic or foreign energy companies.
Facing the brinksmanship of a Kremlin fuelled with the confidence
of energy revenues, foreign political and business leaders have
lacked a strategic response. Now they must more forcefully advocate
a principled commitment to the rule of law in Russia, making clear
the costs and consequences of the whimsical attitude towards law
that is the norm of the current regime.
11 October 2007
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