Business As Usual
	Investors stick with Russia despite the Yukos affair, but some wonder if there's worse to come
	By PETER GUMBEL

Posted Sunday, November 9, 2003; 13.45GMT

	PHOTOXPRESS/AFP/GETTY IMAGES FRIEND IN NEED: Putin met Burluconi at the European Union summit in Rome.

You might think the arrest of Russia's richest man — and the seizure of some $13 billion of his company's stock — would have a chilling effect on business investment in the country. But you'd be wrong. When Russian President Vladimir Putin visited Rome last week for a European Union summit, Fiat used the occasion to sign a deal with a Russian car distributor and announce that it was thinking about building an assembly plant in Russia. Oligarch Mikhail Khodorkovsky, charged with tax evasion and other crimes, awaits trial in a Moscow jail, and his assets in Yukos — the firm he built into Russia's biggest oil producer — remain frozen. But if Fiat had any qualms, it wasn't letting on. The company "is undertaking the new venture in the same spirit as its initiatives in the past," said Fiat president Umberto Agnelli.

Putin's critics believe Khodorkovsky's arrest smacks of past initiatives too: the arbitrary detentions and state control of the economy that characterized Soviet times. Khodorkovsky is just the latest among a group of oligarchs — the businessmen who shot to fame and fortune during the wild privatizations of the 1990s — to have been imprisoned or flee the country. Some see these prosecutions not as an effort to clean up Russian business, but as the Kremlin's attempt to break the power of the tycoons — especially Khodorkovsky, who had been funding anti-Kremlin parties and hinting at a political career of his own. "It's capitalism with Stalin's face," says Grigory Yavlinsky, leader of the opposition Yabloko Party. "Similar things have been happening to thousands of entrepreneurs all over the country. Business and power are Siamese twins in this country. When these twins come into conflict, grave developments like this result."

Since he became President in 2000, Putin has suppressed the independent media at home, centralized power in the executive branch, pursued a brutal war in Chechnya and bullied the countries along Russia's southern borders. "The United States cannot enjoy a normal relationship, much less a partnership, with a country that increasingly appears to have more in common with its Soviet and czarist predecessors than with the modern state," U.S. Senator John McCain said last week. Is Putin really out to turn back the clock?

Western governments and businesses are reserving judgment. In Washington, the Bush Administration has limited its public criticism to a statement of concern about the rule of law in Russia. At a joint press conference in Rome, Italian Prime Minister Silvio Berlusconi delivered a passionate defense of Putin — then jokingly offered to become his lawyer — though other E.U. leaders later rejected Berlusconi's comments. A spokesman for European Commission President Romano Prodi announced that Prodi had told Putin he was concerned about the security of foreign investment in Russia. But by then, Putin had moved on to Paris for a cordial visit with French President Jacques Chirac. Western investors, meanwhile, are voting with their wallets. Besides Fiat, another big European company announced a Russian deal last week: Germany's Deutsche Bank said it is buying 40% of a Moscow-based stockbroker called United Financial Group. It hopes the $70 million move will make it a leading player on the Russian stock market, which has been roller-coastering since Khodorkovsky's arrest. "We see it as a commitment to a country with good long-term prospects," says a bank spokesman.

Executives at Yukos are far less confident about their own prospects. Last week about 60 employees who had applied for passports over the past three months received letters saying that their applications were being passed to the Russian security services, signaling a likely delay of approval. Many managers suspect their phones are tapped and think they're being tailed, just like in the bad old Soviet days. "They plan to destroy the company," a senior executive told Time.

1 | 2 | Next

	Tying Up A Tycoon: Khodorkovsky' arrest is a reminder that business as usual in Russia is still awfully unusual 11/3/03 Going For The Moguls: Has the Kremlin declared open season on the oligarchs? 7/28/03 More Related Items | Search all issues of TIME Magazine