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The Wall Street Journal: Putin Puzzle Revisited

BUSINESS WORLD
By HOLMAN W. JENKINS, JR.
December 13, 2006; Page A19

You have to admire the perseverance of Western energy investors in Russia, whom no amount of homicide, arbitrary contract abrogation or naked shakedowns can discourage.

Though Shell is being muscled out of a $20 billion deal to develop a Far East oil and gas field, and though American minority shareholders got wiped out along with Mikhail Khodorkovsky in the seizure of Yukos, Western money continues to take its chances on Russia out of desperation more than anything else. The world may be rich in hydrocarbons but opportunities for Western corporations are vanishing behind closed nationalist doors in country after country, where governments increasingly monopolize the development and production of oil.

Western investors have gotten accustomed to overlooking a lot in Russia, but they may be unwise to overlook the sensational polonium murder of Alexander Litvinenko, a critic of Vladimir Putin.

Mr. Putin’s presidency is constitutionally mandated to end in 2008 when new elections will be held. But who is Putin’s Putin? Mr. Putin succeeded Boris Yeltsin by promising that, whatever purges Mr. Putin might carry out, Mr. Yeltsin and his family would be shielded. Mr. Yeltsin was old, ill, alcoholic and Mr. Putin’s offer must have seemed one he couldn’t refuse. Mr. Putin is young and vigorous, and has no reason to put his fate in the hands of a successor or successors who wouldn’t be able to guarantee his lifelong immunity even if they wanted to.

In turn, if Mr. Putin amends the constitution to keep himself in power, it could provoke international repercussions that could undermine the assumptions on which much international investment is based.

To wit: For a lot of reasons, investors have been able to assume that, whatever happened in Russia, their home governments would at least be supportive of their investment efforts. President Bush pronounced Mr. Putin a friend, and needs Russian support for U.S. forces fighting in Afghanistan. German politicians have pushed and cajoled energy firms to increase ties to Russia. Former Chancellor Gerhard Schröder even sits on the supervisory board of a Gazprom affiliate. All this reflects a Western calculation that Russia has nuclear weapons; Russia is a potential nightmare; Russia has energy the world needs. We must cling to Mr. Putin as an acceptable partner and hope for the best.

The Litvinenko murder, rightly described as the first case of nuclear terrorism, opens up a can of worms. The world media is enthralled with the story. Several British and German bystanders show traces of polonium poisoning. The heat will be on investigators to get to the bottom of the matter, and such investigations have a way of running beyond the power of governments to keep the lid down.

More threatening to Mr. Putin, Litvinenko wrote a book linking him to the original sin of modern Russian politics, a string of apartment bombings in 1999 in Moscow and other cities that killed hundreds. The bombings were blamed on Chechen terrorists, letting acting President Putin launch the second Chechen war and helping him win election in his own right. There soon followed a series of homicides and arrests and constitutional moves that shut down prospects of journalistic and legislative investigation into whether the bombings had actually been a government provocation.

Now, there was some eye-rolling when this column two years ago noted parallels between Mr. Putin’s career and Saddam Hussein’s. Saddam came to power after the early retirement of his mentor, who (like Mr. Yeltsin) promptly became invisible. Saddam’s first act was to start a war. Etc.

But the real point was that Saddam became a hostage of his miscalculations, especially overestimating the power Iraq’s oil gave him to manipulate other governments. Mr. Putin’s best option, perhaps his only option, is to play out his hand, putting his chips on Western governments to cover up for him. Last week the Duma gave preliminary approval to a law that would directly grant the president power to impose economic sanctions on foreign nationals. The Jamestown Foundation, which monitors Russian politics, reports: “The proposed legislation, ‘On Special Economic Measures in Case of an International Emergency Situation,’ would let the president freeze trade contracts, stop financial transactions, prohibit tourism, and impose other economic sanctions.”

Sen. Richard Lugar, who sees which way events are moving, late last month gave a speech in Latvia warning NATO urgently to adopt the position that energy sanctions imposed on a member state are an act of war against NATO itself.

Put yourself in Mr. Putin’s shoes. It’s hard to see how, except by holding onto power and trying to use it to control his circling enemies, he could hope to avoid becoming a target of political or legal retribution sooner or later. He’s riding high in domestic polls, thanks to a recovering economy, no small thing. But the Litvinenko murder may have been the thread that begins the unknitting. The real threat has always been Ryazan. That’s the Russian city where, on Sept. 22, 1999, a resident noticed men unloading bags of “sugar” into the basement of a large apartment block. The sugar was the explosive RDX; the men were Russian federal security agents. Moscow claimed the incident was a training exercise, but the apartment bombings, which had killed 300 of Mr. Putin’s subjects, suddenly stopped.

Western governments have been nothing if not resolute in turning away from Ryazan and the evidence of the crime that allegedly underwrote Mr. Putin’s rise to power. Western leaders might prefer, all things considered, to see him remain in power rather than deal with the consequences of Ryazan. But it is not in the nature of the world that such a mystery can be concealed forever, or its consequences ducked.
 
ABOUT THE AUTHOR
 
Holman W. Jenkins Jr. is a member of the editorial board of The Wall Street Journal and writes editorials and the weekly Business World column.
Mr. Jenkins joined the Journal in May 1992 as a writer for the editorial page in New York. In February 1994, he moved to Hong Kong as editor of The Asian Wall Street Journal’s editorial page. He returned to the domestic Journal in December 1995 as a member of the paper’s editorial board and was based in San Francisco. In April 1997, he returned to the Journal’s New York office. Mr. Jenkins won a 1997 Gerald Loeb Award for distinguished business and financial coverage.
Born in Philadelphia, Mr. Jenkins received a bachelor’s degree from Hobart and William Smith Colleges in Geneva, N.Y. He received a master’s degree in journalism from Northwestern University in Evanston, Ill., and studied at the University of Michigan on a journalism fellowship.
Mr. Jenkins invites comments to [email protected].

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