July 30, 2004


But the destruction of Yukos is about more than a rich, arrogant jerk getting his deserts and investors in one of the world’s riskiest stock markets getting burned. At stake is the direction of Russia’s ongoing experiment with its unique brand of post-Soviet capitalism and whether the privatization process that forms the foundation of Russia’s economy will be subjected to additional modification. Arguably, this could lay the groundwork for “more competition in the workplace and greater social equality,” says Lavelle.

But once the renationalization genie is out of its bottle, stuffing it back in will be difficult. And competing for the title of the northern hemisphere’s version of Zimbabwe, where Robert Mugabe committed macroeconomic suicide by seizing farms from white landowners, is probably not the way the newest member of the G8 club of supposedly developed nations wants to make its mark. Foreign investment, the lifeblood of the economic growth before which Putin piously pretends to genuflect, will take a holiday far away. Meanwhile, fears that Yukos will stop pumping oil are pushing global oil prices to fresh highs.

That would indeed be suicidally stupid for Putin — but such behavior is not unthinkable. And this explains how hard it is to turn a former dictatorship into a free-market democracy. The Cold War ended over a decade ago, and Russia is still in an uncertain state. This should put Iraq’s transition in perspective.