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Mikhail Khodorkovsky: The Man Who Stood Up to Putin

November 27, 2017

The former Russian Oligarch’s insights on Vladimir Putin and the country Churchill referred to as a “riddle wrapped in a mystery inside an enigma.”


I. Communist | II. Oligarch | III. Prisoner | IV. Putin | V. Anti-American | VI. Future

In Siberia, the high for the day in late October is about 3 degrees. It must have felt even colder at 5am when Mikhail Khodorkovsky poked his head out the door of his private plane. As soon as they saw him, Russian Secret Police commandos raided the jet and placed Khodorkovsky under arrest. He gave himself up without resistance. He knew this was coming.

Khodorkovsky was Russia’s richest oligarch as well as a fierce critic of the country’s president, Vladimir Putin. Despite Russia’s enormous size, the country wasn’t big enough for both the president and his powerful opponent. This would be a day of reckoning.

I first met Mikhail Khodorkovsky on one of his frequent trips to the United States, a country he has studied and understands well. He felt he needed to tell the story of modern Russia and what lies behind Vladimir Putin’s tactics, including the American election hacking.

Here is his story.

I. Communist

Jeff Cunningham: As a young boy, you were a leader in the Communist Youth League. How did you become a great capitalist?

Mikhail Khodorkovsky: You need to understand the times we were in. When I was growing up in the Soviet Union, the Communist Youth League was an ordinary part of everyday life.

For example, in the U.S. right now, some children are homeschooled. This might seem a bit extravagant to some but it’s done. In the same way, in the Soviet days, if you didn’t send your kids to the Communist Youth League, that was viewed as an extravagant gesture.

Unlike North Korea or East Germany, everybody was less serious about ideology, so metaphorically, we had to dress alike, but what we were actually thinking didn’t concern people all that much. That said, I was absolutely convinced at the time the proper path was socialist communism. In today’s America, a significant part of the population seems to think the same, and in Europe, the majority feels this way.

JC: Was there a tipping point?

MK: Change came to the Soviet Union in the early 90’s. That was when we got to see an entirely new world we hadn’t known existed.

For example, my dream since childhood was to be a plant manufacturing director, but I knew it could only be accomplished at a relatively later stage of life. Now, all of a sudden, I got this unexpected opportunity to head an operation that depends exclusively on me.

JC: Were your fellow Communists appalled by your change in belief?

Yes, Older people especially were very skeptical. They said, “What do you want to do in your life? Do you want to follow a serious life path or do you want to play perestroika games?” In those days, this was the name they gave to business startups, Perestroika games.

You need to understand in the Soviet Union, starting a business was permitted by one document, but another document, and one that had not been repealed, called it a crime. So with an understandable tremor in my voice, I told my older colleagues, “I think I want to engage in these perestroikagames.” They looked at me like I was an idiot. Until that point, what had been my normal life trajectory ceased forever.

JC: You once said, if the old Mikhail met the new one, he would shoot him. I notice you’re still alive?

MK: I started engaging in entrepreneurial activity by the end of ’86. But it took time, about five years before I was able to make a total shift of consciousness. We’re talking about the period between when I was 23 and 28, so I was quite young still.

JC: You became an advisor to Russian president Boris Yeltsin, and the CEO of Yukos. What led you to rise so quickly?

MK: It seems I was destined in some way. In nursery school, they asked me, “What do you want to be when you grow up.” I didn’t say airplane pilot, I said plant director. I had another, perhaps sentimental reason. One of the walls of the daycare center was next door to the wall of the plant. My parents worked at that plant and the plant director was the most important person there. So I literally had in me from the earliest childhood this idea to become a leader.

II. Oligarch

JC: You turned a collection of failed assets into Yukos, the second largest oil company in Russia. How challenging was that?

MK: Technically, this was the fourth large business that I developed up until that time in my life. I made four companies that subsequently were worth over a billion. All my life I worked in companies engaged in chemistry, which I studied in college. At the time, Yukos had about 120,000 employees. But just as importantly, it was six months in arrears on paying wages, and $3 billion in tax arrears.

The first thing I did was to ask the former CEO of the company to fly with me to areas where we were producing oil and to introduce me to the workforce. Unfortunately, he neglected to inform me in advance the employees had not been paid wages for six months.

JC: The employees must not have been very happy to meet you?

MK: When I first met with the workers, they let me know not only did I owe them back salary, but they expected a raise, too. I said to them “there is an easy way we can solve this problem. Since I don’t have any money to pay back wages, all I can do would be to fire you and hire new people to replace you.”

But I said I had a better idea.

Here is where the idea of becoming what you might call a business leader started to take hold. First, I said to them, “let’s get this business back on its feet. Then I can pay you back wages.” This took some risk as you will see. Because in Russia at the time, the big question was, would they believe me?

JCHow is managing a workforce in Russia different than US?

MK: In the U.S., it is more nuanced, as unions might be involved. But in Russia, things are simpler, as these workers could simply beat me up and take me out. On the other hand, we don’t have unions. On the other hand, they didn’t beat me up, so, as you say, there are pluses and minuses. By 1998, we were able to lift the company back on its feet.

JCYou turned it around. That must have felt great?

MK: Only just as soon as the company was doing okay again, we had paid back the wage arrears and the crisis had been avoided, the bottom fell out of the market.

Oil was $12.00 a barrel. Getting the oil to market cost $4.00 a barrel, taxes, another $4.00. That leaves you $4.00 gross profit, but my lifting cost is $12.00, so I had to do come up with another turnaround plan. I gathered the workers together, 700 of them who represented the 60,000 people in that region alone. I say “Guys, here’s the new deal.”

I told them plainly, “the first thing that has to happen is you’ve got to agree to a 30 percent wage reduction. You’re going to have to vote in favor of that.” Again, it was a stark choice. Either they agree or they can take me out. Instead, they asked, “When will you return our money?” I said, “In a year.” They agreed.

JC: What did you do to convince them to hang in there?

MK: It wasn’t just what I said but what I said to them personally.

I traveled to all the regions across our giant country, and spoke to the workforce about their doubts and slowly was able to convince them. But I also warned, it’s not going to be easy. After that, I had to take severe action and reduce the workforce two times in the following year. I just simply had no other choice. But finally, our productivity began to pay off. I knew it was the beginning of the end of the trouble when our lifting cost came down from $12 to $1.50. This wasn’t just due to staff reductions, of course. We also changed our technologies.

But in order to change the technologies, we had to change the culture and to do that, we needed to show that the situation was really, really dire.

JC: What was wrong with the work culture?

MK: I’ll give an example. In the oil business, you have to lay pipes into a trench. They are wrapped in insulation. If this insulation gets damaged in any way, the pipes will have a useful life of 2–3 years instead of 15. That’s why they lay these pipes on a bed of soft fabric and sand while you’re watching. But the moment you turn your eyes away, they pull out a bulldozer and toss the pipe into the trench.

JC: Were social issues difficult?

MK: Drunkenness at work is another example. The first time I came to the company, the head of one the units that numbered several tens of thousands of people was lying in the gutter drunk. This wasn’t an isolated case, it was the norm. Two years later, there were almost no cases of people coming to work drunk. The few cases that did occur, I looked at those myself, personally.

Until you deal with all that, you can bring in new technologies, but you can’t get anything to work right until you’ve convinced people they need to change. You see, running a business in Russia, you don’t have the power to make workers do anything. There’s no police. There’s no authority. There is only you and your relationship with the workers.

JC: How did you earn your employees trust?

MK: After I’d made the acquaintance of most of the workers, I went through the whole oil production chain and actually worked for a week or a week and a half at every job.

I’ve got a dozen specializations. For instance, when the workers are way out in the field, they spend two weeks living in trailers. I went into the field and lived in a trailer for weeks. I still remember this. The other thing that brought us closer together, I wasn’t judgmental about them in any way. I thought of our relationship as coworkers.

JC: What were your relations with the workers like?

MK: This is a really amusing situation that happened there. There’s about 150 guys there that gathered together to chat with me. At one point, I asked, “Raise your hands. How many of you have done time in prison?” All hands went up. Then I said, “okay, who has been in jail twice or more?” Again, the same hands. Then a third time in prison, and so on.

Yet all during that time, I felt perfectly comfortable interacting with them. I never had the feeling that they were subordinate to me. Frankly, it was the same situation when I myself was in prison, too.

JC: If you Google your name it says you were the richest Oligarch in Russia, worth $15 billion dollars. True or false?

MK: First of all, let’s understand what 15 billion dollars means here. This is the value of the shares I held as long as I was at the helm. The largest shareholders owned 60% of the shares and I held half of their total.

When I had to resign, I had to forfeit most of my shares, so 15 billion is a paper number. I always took a very calm attitude about the description of my wealth. In our line of work, unlike Silicon Valley, if your company doesn’t have much revenue, it isn’t worth much either. Had I known that there was a sector like technology where you could make losses and still be worth billions, I might’ve gone into that sector. Unfortunately, I didn’t know that then.

JC: Should people resent the money you made?

MK: When people ask, I tell them, “I got three percent of the incremental growth of the company during my tenure.” I think that’s fair.

JCWere there any mistakes and do you regret them?

MK: What I do feel uncomfortable about, is there were mistakes made and I had to fix them subsequently. Actually, I’m not sure how well an American audience will be able to understand this. As the head of the company, my focus was 100% on the company. People ask, “Why didn’t you also engage in fixing social problems?

I respond, “In those days, it didn’t even occur to me.” I was a young person who had become the head of a big company. I, honestly, felt that what I should be doing is focusing on my work and matters of state should be handled by others.

As I look back, the problem was there were no others ready to fix the problems of the State. Once I realized this, I did start to face those issues and created two organizations called Youth Civilization and Federation of the Internet Education that focused on those issues. I admit, I should have seen this earlier and done something sooner. I do feel bad that I didn’t realize the biggest problems were not about running the company.

JC: Was it lonely at the top?

MK: In my life, I had roughly six global partners and I could call on them for advice at any time. But it was always a given that I am the one that bears the responsibility for making the final decision. You could say that is a lonely place. That, by the way, was one of the reasons I returned to Russia once the attacks against us by the administration began. You see, I felt I was responsible for the company. I had to deal with it.

III. Prisoner

JC: Take us back to the morning of October 2003 when Secret police commandos stormed your plane and placed you under arrest. Yet, you said at the time you felt total relaxation?

MK: Over a span of several months, there was the expectation that this arrest was about to happen.

I was resisting the political drift of my country at that time. I wasn’t the only one, but I was the focus. The way things were evolving became perfectly clear to me. Shortly before, they had arrested an employee of my company and then a friend. I realized they were preparing to arrest me. They allowed me to leave and hoped that I would stay out of the country. But I felt I had to return, and once I did, the countdown started. So you could say a certain weight lifted off my shoulders.

JC: You had left Russia and then returned. Did you have any idea how tough it was going to be for you?

MK: I had talks with friends before I returned. Yes, there was no doubt, I was assuming I would spend from two to four years in jail. It’s not that I was looking forward to it, but I was ready to do that. When it turned out to be 10 years, I would call that a little on the too-much side.

JC: How did the ten years in prison change you?

MK: It’s very hard for me to distinguish between how I changed in ten years because I was in prison and because I got ten years older. But I do have some observations to share. In jail, I met people who belong there, I’m afraid to say. I concluded that for many of these people it would be better for everyone if they were never let out.

I also met people who, never want to leave jail. Some people in Russian jails tattoo prison cell bars across their face, a sign they will refuse liberation, refuse to be free. Then, the overwhelming majority of people I saw in Russian prisons, prisoners are very young. These are people that need to be worked with because the prison system, as it stands, creates de-socialized people out of them.

JC: What is the biggest problem facing former prisoners?

MK: The biggest problem they face is after prison, they’ve been out of the workforce for several years, it’s hard to get back.

The most important thing is that these are young people and what is being beaten into the heads in prison is you needn’t think. Do not think. The leadership does all your thinking for you. Now, this person gets released. The military won’t take them even though the military’s a place where ‘don’t think might actually be a useful skill. Nobody’s going to hire them for any decent job because everybody needs independent thinkers.

JC: Where can they go?

MK: The one place is into crime where they play the role of foot soldier. You go to work for a so-called criminal organization. There, ‘don’t think, just do’ is exactly what is required. Some guy tells you, “Go in and beat that person up.” You don’t think. You just go and beat that person up. I spoke with the prison authorities on many occasions. I asked them, “What are you doing? Don’t you realize you’ve created a factory for producing gangsters?”

Their answer, “What can we do? These are our instructions.” I think this is something that absolutely has to be changed.

JC: When you were released from prison, you said, “It was all like autumn rain, an unpleasant phenomenon, nothing more.” What did you mean?

MK: This is just how I perceive things. But I am not so calm about everything. There are people for whom I have powerful negative feelings. One of these, Igor Sechin, I would call my bitter enemy. If I can do something to ensure that he ends his life in jail, I’m going to do that. Why? Because he crossed the line and made it personal.

JC: How did he cross the line?

MK: A young lawyer who worked for my company died because of him. It wasn’t just by accident. It was intentional killing. It was a hard and heavy death. In one year in jail, this person went from stage one AIDS to stage four because they refused to give him medicine. The reason they weren’t giving him the medicine was because they wanted him to give certain testimony against me. That’s personal.

JCWhile you were in prison, your mother, Marina said, “It is hard to stay strong, but people should tell the truth and should not be afraid.” Did those words inspire you?

MK: For myself, what my parents think of me is important.

There is time back when I was working in the Young Communist League and my mother said to me that she’s ashamed that her son is working in the Young Communist League. I didn’t understand it then, but it certainly had an impact on me. When my mother told me “you have to remain strong and I’m proud of you,” that really had an impact on me.

IV. Putin

JC: Do you agree with Garry Kasparov, the grand chess master, who said, “The Russian word for fake news is news.”

MK: Well, I know why he said what he said. The actual situation is more nuanced. If you talk to Russian people, you’ll find they know what’s going on. News is not hidden. Sometimes news is distorted or the order in which stories are presented aren’t necessarily in the order of importance.

What those who criticize Russian news are missing isn’t the news, it’s what Putin’s propaganda machine is doing. It has learned how to make people believe in presumptions. For example, you and I can see this brick wall here. We may have our own impressions about whether this is a pretty wall or not, but if I take ten people, and I say, “Look at how ugly this wall is.” Eight of those people are going to be under the presumption the wall is ugly. This is what Putin’s propaganda does. This is what we’re trying to fight.

JC: American media points to Russia’s 120 Facebook accounts (of a total of 2 billion) as a sign Russia tried to hack our election. Is this true or false and what was the strategy behind this?

MK: There was no strategy and the American reaction may be overstated, but I understand why they are in a huff. If I intentionally step on your toes, it’s not all that relevant whether your toe got hurt or not. You will be angry at me.

JC: Do you believe Vladimir Putin was behind this?

MK: There are two very important points that need to be understood on this subject first. When you hear a phrase like, “Russia wants to influence the American elections,” I assure you, the Russians aren’t even thinking about the American elections.

It’s a small, tiny group of random people some of them sitting in the Kremlin who, for some reason have set themselves this task. The second point, and one which still surprises me that Americans do not understand, Putin doesn’t run all of Russia.

He doesn’t even run his inner circle entirely. He’s, in general, the guy who doesn’t like to spend too much time working and neither is he a great organizer. What he wants to be is a guy who can make everything look like it’s humming along nicely without him having to work at it.

JC: To Americans, Russia seems like it is very determined to do things that are detrimental to us?

MK: What America sees as a straight policy line is, very often, just ordinary chaos. Yes, somebody there may have actually wanted to influence the American elections. What country doesn’t? I believe China very much wants to influence your elections, too.

But the main reason for Putin, in my opinion has nothing to do with America. What Putin wanted to show the Russian people is that American elections are corrupt. So the attempts were not to hack the election but mainly to make it look back home like the votes were being falsified in Clinton’s favor.

JC: So what was the real motive?

MK: Putin needed to evoke outrage from Trump supporters to support the thesis — not to accomplish any objective in America — but rather to show Russia, “See, there are no honest elections anywhere in the world.” The point Putin was making was subliminal, “when I falsify elections in Russia, that’s just business as usual. Everybody does it.” I, personally, see this as Putin’s main objective vis-à-vis the American election.

JC: What is Putin like?

MK: When there was a plan to appoint Putin president of Russia, I did not support him, but I didn’t make any public announcements. I didn’t say anything against either because I felt that’s none of my business. I felt that Boris Yeltsin, the outgoing President of Russia, knows better than I do. If he thinks that Putin’s the right guy, well, that’s his business.

Then, for a while, I actually thought that Putin may have been a good choice. Putin’s a very talented person in establishing communications. He mirrors you, so you see in him what you want to see in him. Then, the situation changed. They started doing things that very obviously went totally against the grain of what I believed in.

JC: Did Putin change and did that change your opinion?

MK: I took a step back and tried to minimize any direction with him entirely. I worked with the chairman of the government and for the required interactions with Putin. In fact, in that day, there were lots of occasions that were required interactions with Putin, I had my colleagues go to those events.

At one point, I realized that a choice was being made about the direction that the country. There were two choices. The first is an open type of economy, transparent and slowly being built along western standards. The second model is our traditional corrupt system. At this point, I already understood that if that path is chosen, a lot of doors get closed for us. I didn’t want that and many of my colleagues didn’t want that either. That’s why I went on the attack and put Putin in the position where he had to make a choice against me. What I didn’t know at the time is that he had already made his choice.

JC: In Russia, the Beslan terror attack in which 500 schoolchildren were killed is thought of as 9/11 in the United States. Did this turn Putin into an authoritarian?

MK: Quite candidly, no. In fact, Putin cynically used that attack to take away the regions right to choose their own governors. That choice had nothing to do with the attack. I should preface this by saying I am not an expert on counterterrorism operations.

I do not know if there would’ve been more or fewer losses of life with another scenario, but it’s absolutely clear that the decisions that were made with respect to the Islamic terrorists were, first of all, a decision to lie about the number of hostages, to lie about the situation, in general, and secondly, I think the decision to make the attack was made by Putin because he did not want to give his opposition, opponents an opportunity to get there first and play the role of peacemakers.

JC: You were in prison during the attack. How did you know what was happening?

MK: You are right, I was in jail at the time. We were being allowed a limited opportunity to make phone calls to relatives. My parents told me that a large number of the school children after the attack were now in a hospital in Moscow. My parents said we want to help these children once they get out of the hospital to find them places to live because many of these children had lost their entire families. They were all alone now.

JC: What did you tell your parents?

MK: I told my parents that’s not going to happen because these kids are, right now, in the spotlight and the government’s going to be right there to make sure that it’s the one that’s gets the credit for helping them.

In the end, though, a few of those children, if my parents hadn’t gone to their aid, would’ve had nobody there to meet them when they were released from the hospital. To me this is profound.

When you’re the head of the country, and a tragedy has taken place and a month later, you’ve forgotten about these kids that are being released from the hospital, something is very wrong. You asked for my opinion of Putin? This man, Putin, does not have a heart. He may have something else there, but it’s not a heart.

V. Anti-American

JC: 55 percent of the Russian population expect Putin to return Russia to the status of a great and respected country. Tell us why?

MK: For the older generation, the memories of the old Soviet Union’s place in the world are very important. What’s interesting is that the younger generation have divided into two parts. One half want to be part of the new global world. The other half want to be in a Russia that the world respects and fears. Respects and fears to many Russians actually have an equal sign between them.

JCDo you find interesting parallels between Russia and America?

MK: In general, I think Russia and America are very similar. Both Russia and America are big inward looking countries. The overwhelming majority of Russians have never been outside the country. The majority of Americans have never been outside the country either, except maybe a quick trip down to Mexico or across the border to Canada. From this point of view, neither Russians or Americans are all that interested in what’s going on in the rest of the world.

Yes, we are similar.

JC: Are Russians still believers in Socialist Communism?

MK: In the economic sphere, Americans, much more than Russians think their personal, economic future depends on them alone — even them personally. In Russia, Siberians are like that. Central Russia is very much reliant on the state. America also has a segment of the population heavily reliant on the state, and unfortunately this segment is growing.

JCWhy did Putin go anti-American?

MK: The reason is simple. Things aren’t going all that well in Russia. Putin needs to have some way of explaining it to the people. Can they blame the opposition? No, because the image of the great Putin has dealt decisively with the opposition. There is no opposition in the country. Now, China, can get a little scary, so that doesn’t help.

JC: What is it about America that makes us a good target?

MK: Look at America, it’s great, it’s big. People can believe that the Americans are capable of doing all kinds of nasty. America’s a very convenient enemy that can be blamed for all of Russia’s ills. It’s located ‘who the devil knows where’ meaning not near Russia, and doesn’t represent a direct threat to Putin.

VI. Future

JCNow that you’re free what do you plan to do with your life?

MK: I’m firmly convinced that my country needs more than just to replace Putin. I have seen in my life, and I am convinced that any person who’s put in Putin’s place will become another Putin. We need to remake our state into a parliamentary republic. We need for this parliamentary republic to be based on a real federalism. What I’m talking about is something similar to what took place when the United States was founded.

I think this works for Russia, because in this regard, Russia is a country like America. For this to happen, we need for there to have young leaders.

JC: Tell us about your think tank, Open Russia.

MK: What I’m trying to do with Open Russia today is to help develop these young leaders. The work that we do is political education, participation in the elections, provide legal support and information to society. Now our organization has representation in 25 regions. There are a thousand people who are official participants in this association. Despite all the pressure that the authorities are exerting, they continue their work.

If I live to see the day that Russia gets a new political system, I will feel that this part of my life, too, has been a success. For anyone wanting to learn more about our activities, please go to Open Russia online.

 

Author’s Bio

Jeff Cunningham is an advocate for enlightened global leadership, which he calls the most valuable natural resource in the world. 

He is a Professor at ASU’s Thunderbird School of Global Management and was the former publisher of Forbes Magazine, startup founder, digital content CEO, and ran an internet venture capital fund.

He travels the globe in search of iconic leaders. As an interviewer/host, he created a YouTube interview series, Iconic Voices, now co-produced by @Thunderbird, featuring mega moguls from Warren Buffett to JeffImmelt. His articles on leadership have been featured in the Arizona Republic, LinkedIn and Medium via JeffCunningham.com. 

His career experience includes publisher of Forbes Magazine; founder of Directorship Magazine; CEO of Zip2 (founded by Elon Musk), Myway.com, and CareerTrack.com; venture partner with Schroders. He serves as a trustee of the McCain Institute and previously as a trustee of CSIS and Middle East Institute, and as an advisor to the Nobel Peace Prize Committee. 

He has also been a board director of 10 public companies.