12 Jan 2005 Mikhail Khodorkovsky: Letter from a Russian Prison

Mikhail Khodorkovsky writes from a Russian prison, as published by the International Herald Tribune:

The destruction of Yukos is almost done. I did everything I could to prevent the authorities’ personal animosity toward me from harming minority shareholders, ordinary employees and the country as a whole.

Half a year ago I offered to surrender my shares to satisfy the claims against the company. However, another way was chosen – that of a selective application of the laws, of retroactively imposing new legal standards and interpretations, of a straightforward and public destruction of the business community’s confidence in arbitration courts and any authority in general.

The coordination and utter shamelessness of the measures taken by tax, law-enforcement and judicial organs and by companies linked to the government, as well as the unmitigated pressures put on managers and employees of the company whose only crime was that they once worked under Khodorkovsky, leave no doubt that the whole process was concocted…

It has become clear that not only political interests are involved, but others as well, since the methods used harm both the reputation of the authorities and the national economy. But those who concocted this affair don’t seem to care about such trifles.

The issue today is not the fate of Yukos. It is probably impossible to save the company. The question is what lessons will the country and society draw from the Yukos case, whose finale has become the most senseless and destructive event for the national economy in all the time President Vladimir Putin has been in office…

Yes, over the past year, the $15 billion fortune of which Forbes wrote has almost reached zero, and it will soon become absolute zero. But I understood that this would happen, and I asked only that the company and its minority shareholders not be touched, since I felt a direct responsibility before the 150,000 Yukos employees, the 500,000 members of their families and the 30 million residents of cities and towns who depend on the smooth and uninterrupted operation of Yukos enterprises…

In 1995, when I and my team took over Yukos, the company was losing money, it had not paid wages for six months, and it was $3 billion in arrears on debt payments. Yukos was operating in only nine regions of Russia, extracting 40 million tons of oil a year, and the production was constantly falling.

By 2003, there were already Yukos operations in 50 Russian regions, annual oil production amounted to 80 million tons and was growing. Yukos was paying high and regular wages: up to 7,000 rubles a month in European Russia and up to 30,000 rubles in Siberia. The company was the second largest taxpayer in the country (after Gazprom), accounting for almost 5 percent of the federal budget.

I don’t want to go in detail into what amazing imagination it took to invent the taxes that Yukos purportedly owes – according to experts at the Ministry of Taxation, Yukos should have paid more in taxes than it received in revenues. This will someday be cited as a bad joke in textbooks on taxation law, since they proved that oil production in Russia is not profitable. Bureaucrats will stop at nothing to redistribute property…

This is, indeed, the only possible and correct choice – the choice of freedom.

I have great pity for those authorities who sincerely believe that they are doing a good thing for the country, for the people. The road to hell is paved with good intentions. Further down this road they will realize that repressive methods and the forced redistribution of wealth are not compatible with modern economic development. And they will not be able to limit this assault to Khodorkovsky, Yukos or the oligarchs – their victims will be many, including those who created this machinery….