The Khodorkovsky trial outcome and Putin anger management

Despite the all-too-predictable guilty verdict, the outcome of the second Khodorkovsky trial did produce a surprise after all. Readers of TS research may recall my prediction of a “compromise” result combining the inevitable conviction with a fairly light prison sentence (thereby limiting the damage to investor sentiment, or perhaps even improving sentiment relative to low expectations). But the surprise I have in mind is not the tough sentence. Actually, I am sticking to my forecast on that subject since, as happened after the first trial in 2005, the 13.5 year prison term – which, in practice, means another 7 years from now – should be reduced on appeal. And I think it all the more likely that Khodorkovsky will be free in 2-3 years’ time in the light of the real surprise – which was Putin’s remarks about the case in his annual televised Q&A session with the public in mid-December, a few days before the judge handed down the verdict and sentence.

As usual in his public comments on the Khodorkovsky case, Putin implicated Khodorkovsky in murders for which he has never been charged. The extraordinary feature of Putin’s outburst was his anticipation of the verdict – which, in the public mind, amounted to a clear direction to the judge. For in the same breath as quoting a famous lyric by the dissident Brezhnev-era bard Vladimir Vysotsky (“a thief’s place is in jail”), Putin made an explicit reference to the present trial. Immediately after the broadcast, Putin’s minders put out the line that he had only been referring to Khodorkovsky’s existing conviction, but a glance at the transcript leaves no doubt that Putin was pronouncing on the new charges of multi-billion embezzlement.

This trial was all along set to deepen already entrenched pessimism about the rule of law in Russia (incidentally, undoing the effects of many piecemeal improvements in the Russian court system in recent years): but if anything more could have been done to discredit the Russian judiciary, then this outburst by Putin was it. It earned Putin a sharp rebuke from Medvedev, who in his big year-end TV interview said that “neither the President nor any other state official” has the right to express a view about any legal case before a verdict is delivered in court. Putin's gaffe heightens the need to save some face for the judiciary, which is why I think the reduction of Khodorkovsky's prison term on appeal may well now prove greater than might otherwise have been the case.

There is nothing new about such emotional (and ill-advised) outbursts by Putin – especially when challenged in public to defend himself on the most sensitive issues. During his early days in power the red-rag issue was Chechnya, with the Yukos-Khodorkovsky case subsequently taking over this role. Whereas for many years only foreign journalists were able to bait Putin on these subjects (back in 2002 he reacted to a hostile press conference question from a French reporter about Chechnya by telling the journalist to go and get himself circumcised), this latest torrent came in response to a question from a middle-aged Russian woman in Irkutsk (incidentally highlighting a very recent initial shift back towards more open political discussion on the national TV networks).

This characteristic of Putin is at odds with the more familiar image of a cool and steely calculator (although contrasting personality traits are hardly very surprising, especially in “big” personalities who are constantly in the public eye). But I see this combustible side of Putin – more frequently on display during the last year or so, in which his public performances have also become sloppier – as potentially an important part of the political risk story in Russia in 2011.

My strong view is that the logic of Putin’s own plan for Russia’s stable development points to a second Medvedev term, despite the common-sense assumption that a part of Putin will be reluctant to loosen his grip on power. It follows that the main short-term risk stems from anything that could destabilize smooth progress towards that destination. One such threat must be Putin’s angry reactions when he feels he is being “got at”. And two factors make it likely that he will be “got at”.

The first is that he will play his cards close to his chest until the Duma election at the end of the year, thus keeping open the option of a return to the Kremlin. The second is that an important section of the elite wants the country to move on from the Putin period. So in the coming months we can expect a series of direct and indirect attacks on Putin and his associates. This already began in December with an open letter to Medvedev by a businessman called Sergey Kolesnikov denouncing corruption in Putin’s close circle (in the form of the construction of pleasure palaces in Sochi and near Moscow allegedly costing US$1 billion each).

A mounting sense of insecurity – already visible in the determination to keep Khodorkovksy in prison – and leading to tit-for-tat corruption allegations and investigations would not bode well for a smooth political transition. If matters seemed to be getting out of hand, Putin and Medvedev would almost certainly take concerted action to calm things down. But there is still some risk here as strings of unintended consequences get set in motion...