The following interview with Mikhail Khodorkovsky was published by the Russian edition of Forbes. The original version can be found here.

Mikhail Khodorkovsky: «I wouldn’t trust a penny to members of Putin’s inner circle»

In a Forbes interview, the YUKOS talks the company shareholders’ victories at ECtHR and the Hague’s PCA, the West’s sanctions against Russia, the crisis in Ukraine, and a little about his personal plans.

On July 31, the ECtHR is to issue a ruling in the case of YUKOS shareholders vs. the RF, three days after a landmark victory scored by the oil producer’s former shareholders in another important judicial tribunal, the PCA in the Hague. On July 28, the arbitration tribunal partially granted the shareholders’ lawsuit against the RF. A $50 bn award set a record. YUKOS founder Mikhail Khodorkovsky who was pardoned by Russian President Vladimir Putin in 2013 was not a party to the proceedings. Yet, in a Forbes interview, he agreed to comment on his expectations for an ECtHR judgment, the implications of the high-profile arbitration in the Hague, and also on the sanctions controversy, the Ukrainian, crisis, and in his personal plans.

«In my and the tribunal’s opinion, Sechin was and remains the beneficiary»

— Following the Hague tribunal, on July 31, the ECtHR is to issue a judgment in the YUKOS vs. Russia case. What do you expect from the trial and what is your status at the Strasbourg proceedings?

— I am not a party to the proceedings in Strasbourg, just like I was not in the Hague. YUKOS proper is a party. Not being an executive or shareholder of the company, I am not in any way involved in the trial. I have relayed a request, through my attorney, to be recognized as a third party, but the request was turned down by the Court.

As far as expectations, I have not followed the trial close enough since it commenced when I was still in jail and I did not have much of an opportunity [to follow the case]. It is my understanding that the Strasbourg Court ruled the company’s bankruptcy illegal. It did not get into the matter of tax claims, saying that they were an interstate court and that they trusted Russian authorities; therefore, it is outside the court’s remit to get into that part of the case. Thank God, the arbitration tribunal in the Hague did get into that part of the case.
Speaking exclusively about the bankruptcy proceedings and bearing in mind the tradition of the ECtHR, which is not a commercial court but a human rights court, it is unlikely to award a significant recompense.

— Meaning that the $50 bn amount awarded to the shareholders by the Hague tribunal, in your opinion, is not going to increase significantly?

— No, in my opinion, the Strasbourg Court will award a symbolic amount that will demonstrate that, yes, they have found that the bankruptcy proceeding was not lawful. And they did not get into the rest of the case. Not that it would fall under the ECtHR mandate anyway.

Of course, in my day, I was surprised by their decision when they went to the trouble of quoting language used by our domestic courts, although they did not consider the matter itself. I can only speculate as to how such quotes made their way into the text of the judgment.

— There was an active debate of the fact that the ECtHR does not recognize any political motives behind the Russian authorities’ actions in the YUKOS case…

— This is an incorrect interpretation. If you look closely, the ECtHR said that, since it uses a very high threshold of proof, then, despite a political component in the case as recognized by a number of domestic courts, it believes that the evidence submitted to it is insufficient for the ECtHR to find such political motivation. However – please pay attention – it said that there are grounds to discuss this subject, that is to suggest the presence of political motivation. Therefore, it is ready to revisit the issue in subsequent hearings, that is it did not shut the door to discussing the subject and will weigh in on it when more ample evidence is available. That is understandable, as well; for an interstate court, the threshold of proving a member state’s political motivation is, putting it mildly, extremely high.

— In your opinion, why such a radical difference between the Hague and Strasbourg? In the former case, we directly read in the award that the State was biased and involved in the YUKOS case; in the latter, that there is insufficient evidence.

— It is about the difference in the status of the courts. ECtHR is a court that examines the matter of violations of the Human Rights Convention. There are only a limited number of articles in it, and a simple approach is employed: to establish whether or not the Convention has been violated. That’s it. The ECtHR does not consider anything else. That is the reason it has roughly 100,000 cases in the docket distributed among, say, 90 judges. The amount of time they can afford to spend examining a case is extremely limited. That is why they cut off matters that do not pertain to the Convention as much as they possibly can. Thus, they were able to cut off the fundamental matter of lawfulness of additional tax claims against YUKOS by saying that “there is a decision by a domestic court and it is outside our competence to review it to that extent”. The only thing that, in my opinion, they did not do quite ethically is that, without reviewing the domestic court’s judgment as per their status, they went ahead and quoted from it. But they were within their rights to do so.

There is a completely different situation in the Hague arbitration tribunal. Three arbiters are selected, including one by YUKOS, one by Russia, and the two arbiters selected the third. For a decade, the arbitration panel examined nothing but this case, hearing witnesses and experts, reading all evidence, etc. Just think about it: three professionals spent ten years on this. They covered all judgments from A to Z, they did not presume as fair Russian court decisions, because, not being an interstate court, they are not obliged to recognize presumption. In the meantime, YUKOS shareholders complained, in the Hague, that the Russian judiciary procedures were illegal.

As a result, the arbiters examined all the evidence and found that, in their opinion, there were certain weaknesses as far as YUKOS’s employment of the ZATO jurisdictions [Russian courts had found YUKOS’s use of a number of closed administrative-territorial jurisdiction a violation of the tax legislation — Forbes], but those only amounted for 3% of the claims. There were no problems with the Mordovia, Evenkia, and all the other tax schemes because they were all legal at the time, from the viewpoint of minimizing the tax burden. Accordingly, this fundamental matter – slapping the company with tax claims – was ruled illegal. They then examined the bankruptcy procedure, but, in that regard, they did not have radical differences with the ECtHR.

— Going back to the Hague arbitration tribunal’s ruling: the biggest information peg extracted by the media from the language of the award is the story of the Yuganskneftegaz auction, that, allegedly, standing behind the mysterious Baikalfinansgroup was Surgutneftegaz. Was this news to you? Why, in your opinion, did Surgut specifically act as an intermediary between the asset and Rosneft?

— It is hard for me to say why Surgut was selected. We know perfectly well that, both factually, and in the arbitration award, Rosneft and its chief Igor Ivanovich Sechin were appointed the initial beneficiary, Sechin having been behind this entire act of manipulation. That he first pushed forward Baikalfinansgroup as a screen, and then, as yet another smokescreen, Mr. Bogdanov [Surgutneftegaz CEO Vladimir Bogdanov] demonstrates just how thoroughly and rigorously he had prepared for subsequent court proceedings and to what extent Bogdanov, a seemingly independent oil man, depends on the Rosneft chief, Mr. Sechin who held an entirely different position at the time. In my opinion, neither Bogdanov, nor Surgut benefitted from this story in any way, shape or form.

— In your opinion, can this situation affect Surgut negatively now?

— I am no lawyer, but I think that, clearly, a magnifying glass will be trained on the reason for Bogdanov’s major dependence on the authorities and on what he received in exchange for his efforts. But I could not say how it will all end. To me and to the arbitration tribunal in the Hague, Igor Ivanovich Sechin has been and remains the principal beneficiary. In my opinion, even Gazprom is merely a secondary beneficiary in this situation.

— How can the lawsuit it lost in the Hague affect Rosneft’s business?

— In my understanding – not as a party to the proceedings but as the former executive of a major company – in a situation where you are associated with such a risk, and you are expressly named in an arbitration award as the beneficiary of the situation, you are, most likely, going to be cut off from the capital markets. Rosneft will clearly be able to trade oil and earn revenue from it, but it would need some very sophisticated schemes to avoid, so to speak, their shipments being seized while in transit. It is unlikely they would be able to do something that requires a greater degree of transparency.

«There is only one target for all this b/s»

— Former YUKOS shareholder Leonid Nevzlin, in a Forbes interview, said that, in his opinion, the victory in the Hague could prove a trump card for the YUKOS shareholders. They could use that victory to try and lobby for terminating prosecution of former company employees, from Alexei Pichugin who is serving life in prison to Platon Lebedev who cannot leave Russia and to you and Nevzlin who cannot enter Russia. In your opinion, are Vladimir Putin and his inner circle ready to discuss a tradeoff like that?

— I am not in a position where I can offer meaningful comments on the subject. Of course Leonid Borisovich [Nevzlin] is a better judge of the situation. He has been grappling with this problem for the last 10 years. I can only say that I wouldn’t trust members of Putin’s inner circle with a penny. These are individuals who directly lied to courts, knowingly and without making a secret of it, while realizing that it would come out some day. These are individuals who – as I have been told, although I do not have any proof – held meetings with judges before decisions were issued in the YUKOS case. I have no reason or desire to trust those individuals.

— Have you been in touch with Platon Lebedev since he was released? Are you worried that the authorities will now use him as a hostage considering the hook as represented by tax arrears imputed to you and rumors about a certain ‘third YUKOS case’?

— First, regarding the arrears: the very same ECtHR that Russian authorities have suddenly started happily referring to, did find that there were no arrears. It unambiguously says so in the court’s judgment, and the Russian Supreme Court dismissed the judgment to that extent. Our authorities are not sincere in their position. Law means nothing to them. Only strength does. Only something along the lines of “we can bring pressure, or they can put pressure on us”. The authorities do not understand what government institutions and civil society exist for, it’s just a Western invention as far as they are concerned.

Would they use an individual as a hostage? They would if they stood to gain from it more than they would stand to lose. Would they whip out a third, fifth, tenth or umpteenth YUKOS case for that? Again, they would if it serves their interests. I have been completely calm about it for the last half a dozen years or so, after I realized what it was I was dealing with. It took a while to dawn on me because I, too, had harbored certain illusions.

— The losing party in the Hague case spoke at length about the award’s political undercurrents, referring to the current difficult relationship between Russia and the West. What is your response to these complaints?

— There is a minimal interconnection between the court’s award and the current Russia-West relations. Just look at the time sequence of the Hague proceedings. In 2004, when YUKOS shareholders filed their claim, the Russian authorities were only happy to participate in the proceedings. At the time, they believed that they were 100% in the right.

By 2009, 5 years of the arbitral proceedings, after it had become clear that the defendant’s situation was nothing like what it had thought it to be, the authorities announced withdrawal from the Energy Charter. They already understood back in 2009 that they had lost the case, long before the current conflict. For a few more years they remained active, but brutal sabotage didn’t start until about a year ago.

— How did it present?

— I am not informed of all the details, but there were some kind of procedural matters: failure to make complete payments to the court for individual legal procedures, a request to postpone the date of announcing the award, and so on.

— So, what changed a year ago?

– Apparently, by that time, high-ranking officials had realized how it would all turn out but they did not advise Putin accordingly. I am convinced that they did not inform him until the very end. They probably told [him] that, like, some kind of politicking against us is taking place, but they didn’t specify just how catastrophic it was all going to be. I believe that it is only now that as he reads Western media – and he does read them by himself – that he finally realizes what the Western judicial authorities think about the YUKOS case.

All this rhetoric about “the West encroaching on us” is not designed for the public or for the court. It is intended exclusively for Vladimir Putin. So that all the officials involved, first and foremost Igor Ivanovich Sechin, can cover up their behinds and explain to Putin that they indeed were right when they said that everything would work out great but the situation changed and they were taken advantage of. There is only one target for all this b/s. They could not possibly care less about anything else.

«So far, cannons do the talking in Ukraine»

— And yet the information background matches the tribunal’s ruling. What is your personal take on the West putting pressure on Russia via sanctions?

— I have not changed my approach to this matter. There are certain actions and there are explanations for these actions. Where the West’s actions are primarily appropriate the explanations for those actions are such that it appears impossible to support them.

If we were to discuss individual sanctions, that individuals who behave in ways that are completely inappropriate in a civilized world, should not be invited to visit; that money those individuals stole from the government budget must not be deposited in Western banks, then it is an absolutely clear message, one that does not cause any doubts. However when these things are called the West’s sanctions against Russia I cannot possibly accept the language. Russia and Putin’s regime could not be two more different things.

The same applies to sectoral sanctions. If we say that a number of businesses, be it State-owned banks or State-owned companies, are being used by the incumbent regime in order to steal money from the budget, then Western nations’ and Western companies’ refusal to do business with them appears to be a completely appropriate response. However I have just one question: why did you close your eyes to this before? Calling this sanctions against a whole country is, again, inappropriate. Punishing the people of a country because someone is stealing money from those people and because that money is used inappropriately looks outrageous. So, at this time, I feel ambiguous.

— When, in your opinion, will Russia and the West be ready to deescalate the tensions?

— I am convinced that no fundamental improvement in the relationship will occur while Putin remains in power. It is a matter of trust. The West has understood that, even disregarding Putin personally, the people who have rallied around the President, are not to be trusted. One person cannot control the situation in a country that vast. Also, this very person has de facto destroyed government institutions and none of them has any credibility left.

Accordingly, all Russian policies are shaped by members of the inner circle, whose intellectual and moral reputation is crystal clear both to the West and to the Russian public, and that opinion is not going to change. So the situation will deteriorate gradually, if even the rougher bumps are smoothed over. We are currently close to being on the threshold of an armed conflict.
A big thank you to Putin for dragging us here. I am not even talking about the fact that he has driven a wedge between us and the brotherly Ukrainian people; that the prospect of Russia and Ukraine becoming one country is something that has been taken off the agenda for decades at best, although dozens of millions of Russians have relatives in Ukraine.

— Following the Maidan victory you organized a peace-making congress in Kiev and travelled to Ukraine’s south-east. What do you think are ways of resolving the civil conflict in that country?

— If we were to compare the current events in Ukraine to what happened in North Caucasus, one must understand that the Ukrainian events are a fraction of what happened in the Caucasus in terms of ferocity and loss of life. Loss of life is something that can be calculated very accurately, unlike the number of shells fired. Fortunately, the number of human casualties in Ukraine today is smaller than [it was] in the Caucasus by an order of magnitude.

Because some form of reconciliation did take place in North Caucasus, if even in the form of Russia paying war indemnity to the Chechen Republic, that means such reconciliation is possible in Ukraine. Especially because there is much more public support for a unified state in Ukraine. If someone is thinking that what our nationalist chauvinists did there (in my country, they put them in prison for those things, but there they allow them “to do good in full measure”) inspires anyone in Ukraine’s east to seek unity with Russia, I very much doubt that.

True, a lot of blood has been shed on both sides, and I have a lot to say about the deeds of Ukrainian paramilitaries. Not that human rights have been a top priority for the other side. That is why I only very rarely make public comments on this subject. The conflict has gone so far that, unless one digs deep into history, a great deal can be said about both sides, but that is not for me to do. I believe that it is for the civil society to solve what it is capable of solving. So far, only cannons have been doing the talking in Ukraine.

— Could you talk about your personal plans? Are there any public or political projects related to Russia? Do you see yourself returning to Russia at some point in the future?

— As far as my return, you will understand that it is purely a matter of efficiency. If I were to go to Russia now that would not be efficient in the least. I would immediately find myself under house arrest, with my mouth shut. I am not playing suicide checkers with our authorities.

Of course my plans include public activities, and I have previously said as much. If anyone wants to describe those activities as political it is up to them. I am not fighting for power and I owe nothing to those who think otherwise.

I will be sorting out my family issues until September, I have quite a few of those. I have to spend time on that, and if the Ukraine situation was outrageous and I could not stay silent on the subject, I spend the rest of my time on my personal affairs, and this is something that will continue until next fall.

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Editor’s note: For more information about the Yukos ruling, please contact Claire Davidson:

T: +44 (0)20 7520 9215
M: +44 (0)7767 351 433
E: Claire.Davidson@drdpartnership.com