Andrey Illarionov, the economist, expresses his views on the “Khodorkovsky affair” during an online interview as part of the “Outcomes of Putin” project, in the editorial offices of Gazeta.ru.

“In my view he ought not to be there at all, because I do not believe he has committed any crimes for which he should be in prison.

The trial of Khodorkovsky and his partner Lebedev, and also of other people working for YUKOS, was conducted with gross procedural violations. I would draw your attention to the fact that last week we saw yet again that Khodorkovsky was right. The biggest news story about Russia was a report that the extraction of oil has not only ceased to grow, but in absolute terms has actually started falling. This, and not Putin’s election as general secretary of the United Russia party, was the number one news item in the world media.

The main news is a fall in the extraction of oil in Russia, its reaching what Mr Fedun, vice-president of Lukoil, called a plateau. He and other representatives of the oil industry claimed an unsustainably high tax burden was the cause of the absolute decline in recent months, and of the impossibility of any further increase. The Finance Ministry agreed with this view, and proposed that the government should reduce the tax burden on oil companies by several billion dollars. Five years ago Mr Khodorkovsky was trying whenever he had an opportunity to explain that imposing such a tax burden would lead to a reduction of oil extraction. Minfin characterised his position as seeking to undermine its attempts to collect taxes. At that time Minfin claimed his behaviour was unacceptable. Today, five years later, we have confirmation that Khodorkovsky’s forecast was correct It is not the first time he has been proved right.

One recalls his proposal in 2001-2002 to build an eastern pipeline. These plans, together with his campaign against increased taxation, were among the principal charges levelled against Khodorkovsky. In 2002 he proposed that a pipeline should be constructed for $4 billion, using private finance naturally and, if my memory is correct, it was projected to be completed by 2006-2007. Shortly after his imprisonment, this project was revived and handed over to the state company, Transneft, which agreed to undertake it for $11 billion, funded by the state of course. Plus $1 billion exemption from customs duties on the import of items essential for building a pipeline in the forests and mountains of East Siberia, like BMWs, Mercedes, and other items absolutely essential for construction work in the conditions of Transbaikal.

It is now 2008 and, as we know, there is still no pipeline. I even recall that in the early years of the century Yukos was the major individual taxpayer into the Russian budget. It paid more than the sector leader at that time, Lukoil, more than Gazprom, more than companies which employed larger numbers of workers, like RAO EES (United Energy Systems of Russia) and RAO RZhD (Russian Railways). At that time, Yukos was contributing about 5% of all budget revenues. Today Rosneft, which swallowed all the assets of Yukos, which has swallowed many other assets, and which has assets of its own, pays less than 5% into the budget, despite the fact that over this period the oil price has increased by a factor of almost 4. Neither is it the largest contributor of tax revenues to the budget. It was precisely failure to pay taxes which was represented as the main charge against Khodorkovsky. Yet again we see the extent to which Khodorkovsky’s forecasts and proposals are being implemented.

Incidentally, another charge was using the technique of hydrofracturing bedrock formations, which many representatives of the oil industry, including Rosneft, called ecologically damaging, barbaric and unacceptable on Russian territory. After swallowing Yukos , Rosneft now uses this technique on a scale which is an order of magnitude above what was practised in the days of Yukos. Admittedly, there is no comparing the growth rate of oil extraction now and in the times of Khodorkovsky. Then Yukos had it growing by 15-20% a year, and Rosneft by 3-4%.

(Gazeta.ru, 22 April 2008)