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In the News
Last Updated: 11/05/2003
Joe Schumacher

As Putin lunches with the Pope and his new found friend billionaire Berlusconi, the media at home and abroad are beginning to ask who are the lions beneath the Russian throne. Are the siloviki came out from the cold?


Siloviki Versus Oligarchy


Published: November 5, 2003Russia today is ruled by Vladimir Putin's siloviki, former K.G.B. men and military officers who have the nation by the throat. That power-hungry mafia (the Russian word is rooted in "power") brooks no opposition from either the small band of democratic reformers or the political leftovers from the Yeltsin regime.

Only one power center posed a threat to the siloviki's domination of Russian life. This was the group of oligarchs, who became the super-rich by ripping off the old Soviet Union's natural resources when Communism collapsed.

The K.G.B.'s Putin came to power by making a deal: we of the siloviki run the country, and you oligarchs can keep your ill-gotten gains — provided you cut us in on some of the money and stay out of politics.

Not all the new billionaires went along with the new corruption. Boris Berezovsky, manipulator of Yeltsin, had delusions of staying on as the man behind the throne, while Vladimir Gusinsky had hopes of creating a free national media network, not beholden to the Kremlin bosses. Putin confiscated all he could of the wealth of both men, who would not do his bidding, and chased them out of Russia.

But along came smooth, likable Mikhail Khodorkovsky, oiliest of oilmen. This youthful robber baron, after amassing his $8 billion, became an exemplar of economic transparency — openly declaring corporate income and paying taxes, accessible to interviewers — thereby beguiling foreign investors, who wanted to believe that free enterprise and the rule of law had come at last to Russia.

"Open Mike's" plan was to tout his Yukos oil stock, then merge with Exxon Mobil and become as rich as Bill Gates. But he apparently felt the need for more political protection than the siloviki would sell. Accordingly, this oligarch of all oligarchs began to ladle out largesse to the starving political parties. This ranged from the Communist Party, allied with the Putin followers, to Vladimir Zhirinovsky's ultranationalists, and included the democratic reform parties behind Grigory Yavlinsky and Boris Nemtsov.

President Putin, fresh from his love-in at Camp David with President Bush, decided that Open Mike was getting too big for his briuki. With parliamentary elections coming up next month and his presidential re-coronation scheduled for March, Putin could afford no media editorial backsliding — or the infusion of money to his opposition to purchase time or space. He ordered the arrest, trial, conviction and jailing of Khodorkovsky and the seizure of his billions in stock. All this was to be done legally by the siloviki's men in black robes, of course, with Putin pretending to have no part in it.

Reaction to the cuffing of Open Mike was predictable: the Russian stock market tanked, the U.S. State Department tut-tutted, Exxon Mobil and other investors ran for the hills, and even the visiting Ariel Sharon of Israel told Putin in Russian that he was making a mistake. Putin's chief of staff and other holdovers from the early Yeltsin era quit in disgust or were quickly forced out.

This reaction bothered the siloviki not a whit; they pretended the political arrest was no different from our investigating Enron. As other oligarchs dived under their desks, Russian voters were delighted at pictures of one of the envied richies enchained.

Some of Khodorkovsky's flunkies are putting out word that their boss may run for political office from jail. That could happen in the U.S. — the election of the Vermont congressman "Spittin' Matt" Lyon in our post-Revolutionary era is an example — but in Putin's Russia, where mass media coverage is tightly controlled, the notion of a grass-roots national insurgency by a half-Jewish multibillionaire is laughable.

Yesterday I asked the reformer Yavlinsky, one of the few who fought the takeover of the economy by the oligarchs in the early 90's, what he thought of Putin's crackdown. "The cure is worse than the disease," was the guarded response on the global cellphone: we are evidently back to the chilling days of K.G.B. snooping on communications.

Which side to root for in the struggle for Russia's political soul: oligarchy or siloviki? Which door: the Lady or the Tiger? I remember the same choice in the war between Iran and Iraq. We can root only for both sides to lose.

Monday, Nov. 3, 2003. Page 1

Putin's Choice Balances Siloviki

By Simon Saradzhyan
Staff Writer

By elevating Dmitry Medvedev, a St. Petersburg technocrat, to his chief of staff, President Vladimir Putin has prevented the siloviki from becoming virtually the sole players in his administration and will thus retain his position as ultimate powerbroker.

Late Thursday, Putin accepted the resignation of Alexander Voloshin as chief of the presidential administration and immediately appointed Medvedev to fill the vacated seat. Dmitry Kozak was promoted to become Medvedev's first deputy.

Medvedev, 38, and Kozak, 44, graduated from the same St. Petersburg law school as Putin and worked with him in the St. Petersburg city administration in the early 1990s. Putin brought both of them into the Kremlin shortly after he was elected in 2000.

Voloshin is widely believed to have stepped down after realizing that he was no longer able to defend the interests of the Family, officials appointed by Boris Yeltsin and their big business allies, from the onslaught of the siloviki.

Putin's decision to accept Voloshin's resignation, after mulling it over for five days, was seen as a victory for the siloviki, officials from the security services who came into the Kremlin with Putin.

"There should be no doubt that the balance of power has shifted greatly toward the siloviki with Voloshin's departure," Yury Korgunyuk of the Indem think tank said Friday. "This signals that the Family is losing the remnants of its clout, but it should not necessarily be interpreted as a full and final victory for the siloviki."

As if on cue, Medvedev came out Sunday night on Rossia television and questioned the decision last week to arrest shares in Yukos. He said the legal effectiveness of the action was not clear and warned that it could have serious consequences for the economy.

Andrei Piontkovsky, an independent political analyst, said Medvedev's comments were a sign Putin was bowing to those who oppose a full victory for the siloviki.

If Putin had picked one of the siloviki to replace Voloshin, the siloviki would have gained near monopoly influence over Kremlin policy, said Korgunyuk and Alexei Makarkin of the Center for Political Technologies.

Instead, Putin picked Medvedev and promoted Kozak. He also promoted Igor Shuvalov, another lawyer, to the rank of deputy head of the administration. Medvedev and Kozak belong to neither of the two main rival groups, and their appointment indicates the emergence of a new group, which Kommersant on Saturday dubbed the "Petersburg lawyers."

Given that the presidential administration outweighs even the government when it comes to formulating, if not implementing, policies, Medvedev and Kozak are in a position to pull strings on many issues.

They cannot, however, match the weight of Voloshin, who was the longest-serving chief of presidential staff in post-communist Russia.

"Voloshin was a generator of ideas, a creator," Makarkin said. "While formally a subordinate, he was also somewhat of a partner for Putin, while the newly promoted men are more the obedient executioners of the president's will."

Despite serving as first deputy chief of the presidential staff for more than three years, Medvedev is still a dark horse. He has maintained a low profile, fulfilling his duties quietly and only occasionally drawing the spotlight, as when he engineered the changing of the guard at Gazprom in 2001.

Kozak, who pushed through the liberalization of Russia's judicial system and other legal reforms, has been more outspoken.

Medvedev and Kozak will be able only to limit, not match, the political clout of the siloviki group, which is led by deputy heads of the presidential administration Viktor Ivanov and Igor Sechin, according to Vladimir Pribylovsky, head of the Panorama think tank.

Their relative weakness and lack of experience in economic policymaking will inevitable lead Medvedev and Kozak to gravitate toward liberal economists in the government such a Finance Minister Alexei Kudrin and Economic Development and Trade Minister German Gref, also natives of St. Petersburg.

If allied, these two groups would probably be able to prevent the siloviki from monopolizing influence on Putin, Korgunyuk and Makarkin said.

However, they would be neither capable of nor willing to prevent Putin and the siloviki from getting rid of other members of Voloshin's team, the two experts said.

The appointment of Shuvalov was seen as a concession to the Family. Kommersant said he will take over Voloshin's role as overseer of the economic bloc in the Kremlin administration and will become the informal leader of the Family group. Voloshin's Kremlin team includes deputy heads of the administration Vladislav Surkov, Sergei Prikhodko, Alexander Abramov and Dzhakhan Pollyeva and presidential spokesman Alexei Gromov, according to the newspaper.

Surkov, the informal supervisor of the pro-Kremlin United Russia party, is considered likely to stay through the State Duma elections in December.

It is also a matter of time for Yeltsin-appointed Prime Minister Mikhail Kasyanov, the experts said.

With the Family weakened and on its way out, Putin will rely on the siloviki and the liberal wing of his team, and play one off against the other to remain the ultimate arbiter, Korgunyuk and Makarkin said.

According to Nikolai Petrov of the Carnegie Moscow Center, however, the siloviki are already unstoppable and will continue to gain influence.

The liberal-minded natives of St. Petersburg in the Cabinet and presidential administration will likely continue to draft and implement economic and administrative reforms to ensure economic growth, but will do so under the watchful eye of the siloviki, Petrov said. "Neither Medvedev nor Kozak nor others are thinking about balancing the siloviki. ... They will be hired managers, but not more."

Russian President Putin Visits Italy

Wed Nov 5,10:42 AM ET


By ALESSANDRA RIZZO, Associated Press Writer

ROME - Away from a political storm at home, Russian President Vladimir Putin (news - web sites) began a state visit to Italy on Wednesday, finding a close friend in Italian Premier Silvio Berlusconi.



Putin — whose two days of talks here include meetings with Berlusconi, Pope John Paul (news - web sites) II and a summit with the European Union (news - web sites) — held his first discussions with Italy's head of state, President Carlo Azeglio Ciampi.

In remarks after the meeting, the Russian president kept clear of the recent outcry over the arrest of Russian oil tycoon Mikhail Khodorkovsky, who is accused of fraud and tax evasion in what some critics allege is a politically driven investigation.

"We have been able to see our mutual understanding and the convergence of our positions on many key problems of the world," Putin said.

His opponents say the arrest was motivated by Putin's desire to curb Khodorkovsky's growing financial and political clout and in retaliation for his funding of parties opposed to the Russian president. Putin denies the accusations.

Ciampi praised Putin's role in Russia's economic progress — without mentioning the Khodorkovsky scandal, which has dragged down the stock market in Moscow. "These advances would not have been possible without the start of the deep reforms invoked by President Putin," Ciampi said.

Before arriving, Putin said Russian tycoons who made money illicitly couldn't enjoy impunity any longer. "Instead, today it must be clarified that everyone must respect the laws of the country," he told Italy's Corriere della Sera daily.

Putin spoke Wednesday of strong cooperation with Italy, citing Italian support for Moscow's proposal of visa-free travel between Russia and the EU.

"Russia and Italy have a shared understanding of the need to cancel the visa barrier — the need to guarantee true freedom of contacts among people on the European continent," Putin said.

The EU wants Russia to tighten controls on its long, porous borders first and make Russian passports harder to forge.

It was Putin's second visit to Italy this year. In August, he spent three days at Berlusconi's Sardinian estate.

Berlusconi and Putin have developed a close friendship, visiting one another and meeting on the sidelines of international conferences. The two dined together Tuesday night and were holding formal talks Wednesday.

Berlusconi, whose nation currently holds the rotating EU presidency, has strongly supported Russia's efforts to join the World Trade Organization (news - web sites) and has even suggested Russia could become part of a "Big Europe" along with Israel and Turkey.

Putin says Russia is not pressing to join the EU.

Thursday's EU-Russia summit is the last such formal meeting before the EU takes in 10 new members in May, most of them Moscow's former satellites in the days of the Soviet bloc. The summit will focus on ties in economics, border control, justice and education.

However, Amnesty International wants human rights high on the agenda, urging EU leaders to confront Putin on the situation in Chechnya (news - web sites). The rights group said Wednesday that European officials should demand answers from Putin on allowing international monitoring in Chechnya, treatment of refugees, and punishing those guilty of serious abuses.

Another international group, Doctors Without Borders (news - web sites), is pressing the EU to raise the case of an aid worker kidnapped in August 2002 in the Russian republic of Dagestan, which borders Chechnya. The group says Russia is not doing enough to find worker Arjan Erkel.



The EU also is urging Russia to sign border agreements with Estonia and Latvia, two countries set to join the bloc next year, and to step up work against organized crime.

Also on the agenda is whether Russia will ratify the Kyoto Protocol (news - web sites) on global warming (news - web sites). Ratification by Russia is the key to putting the 1997 protocol into effect, but prospects for passage in Moscow remain uncertain.

The United States has withdrawn from the Kyoto accord.


Putin's crackdown on oligarchs stirs panic


By James Meek

LONDON: I hope nothing too unpleasant happens to Mikhail Khodorkovsky, believed by many to be Russia's richest man, while he is in prison.

I do not think it will. He has some of the most powerful organizations in the world on his side. Whether it is the White House-to-boardroom-to-think tank merry-go-round of Washington, or British oil companies and their lobbyist Tony Blair, or the western media, into which the agenda of the financial pages inexorably leaks, there is always going to be someone to shine a spotlight on his cell.

I am not so sure about his compatriots. It has been interesting over the past few days to hear US diplomats, British officials and stuffed suits from the European Bank for Reconstruction and Development talking with passion about the sanctity of private property and the importance of the rule of law.

Interesting because this kind of thing - the rule of law, the sanctity of human life, never mind property - doesn't seem to have much bothered eager investors in Vladimir Putin's Russia until now, when suddenly it is their money that looks at risk.

I am more worried about the other 900,000 prisoners in Russia's vile jails, including 145,000 on remand awaiting trial. I'm worried about the 37,000 prisoners with HIV and the 86,000 with tuberculosis.

I'm worried about the Russian journalists being killed and kidnapped when they try to report on corruption. I'm worried about the hundreds of Chechens who have disappeared without trace and the unpunished thuggery of Putin's butchers and bullies in that sad part of the Russian Caucasus.

Various theories have been advanced for why the Kremlin decided to move against Khodorkovsky and begin, at least, to unpack his oil company, Yukos. There has been talk of a power struggle within the administration between old Yeltsinites and another faction which wants to see more state control of industry.

There has been speculation about Kremlin anger over Khodorkovsky's support for Grigory Yavlinsky, the articulate, sympathetic, English-speaking and largely ineffectual liberal politician. Both may be true. The participants in the power struggle may even believe them. But no one ever lost their shirt in Russian politics by betting on the most cynical and simplest explanation.

Could it be that the new patrons in the Kremlin, Putin and his appointees, are bitter because they never had the chance to share out the riches of Russia's natural resources among their clientele, as Yeltsin did before them?

The indignation outside Russia about the possible reordering of Yukos, which made a profit of $3bn last year, comes from an assumption in the west about privatisation which says as much about us as it does about Russia.

The assumption is that if a company is privatized once, it can't be privatised again. But what if Russians are more clear- eyed about the true nature of privatisation than the westerners who encouraged them to do it back in the early 1990s? Westerners who were - at least in the case of the Europeans - not simply promoting a policy tested in their own countries, but attempting to hallow a policy which in the west was highly contentious, and remains so.

Perhaps the reason the Kremlin feels comfortable about nationalizing or even re-privatizing parts of supposedly privatized industries is that the Russian kleptocracy never really believed what the western advocates of privatization so want us all to believe, that an industry which is privatized magically transforms itself into a lean, competitive, consumer- friendly beast run by risk-loving entrepreneurs.

They saw immediately what Russian privatization really was, an extreme version of the western kind, with all its failings: serving shareholders instead of customers; exploiting monopolies; taking government subsidies in the front door and paying dividends to shareholders out the back; effecting a form of legal embezzlement by showering directors with pay, perks and share options.

Consider the dividends the privatized oil firms have been paying out. Roman Abramovich bought Chelsea with his and still had plenty of spare change. Yukos has just decided to pay a dividend of $2bn to its shareholders, the lion's share of which would go to Khodorkovsky.

Khodorkovsky did not create Yukos. He did not discover the oil, build the refineries, lay the pipelines, put up the oil towns on which the wealth of Yukos was built. That was done by the Soviet Union and its people. And yet in western financial circles Khodorkovsky is treated as if he was something like an entrepreneur, as if he had earned the moral as well as the legal right to suck hundreds of millions out of the Russian oilfields into his own pocket.

No wonder there is so much concern in the west about Khodorkovsky's humiliation. It's a smudged, cracked, crooked mirror, but the overpaid private bureaucrats running our privatized industries, who fantasize that, like Bill Gates, they are genuine entrepreneurs worthy of their share options, can just about recognize their faces in there. -Dawn/The Guardian News Service.

Tolerating Putin's Evil Empire
Why Bush is ignoring the latest Russian crackdown.
By Kim Iskyan
Updated Wednesday, Sept. 24, 2003, at 4:29 AM PT

Russia's role in the war on terrorism will be at the top of the agenda when U.S. President George W. Bush meets with Russian President Vladimir Putin later this week. Bush wants Russian troops in Iraq, help with North Korea, and cooperation with derailing Iran's nuclear aspirations. In return, he'll illustrate the harsh reality behind U.S. rhetoric about promoting democracy by largely ignoring the ways in which Putin has been undermining its foundations in Russia.

Putin, a former head of Russia's intelligence agency, has done a lot right since he became president in early 2000, taking Russia off the list of countries that can't seem to get their act together. Unlike Boris Yeltsin, his predecessor, Putin doesn't change prime ministers as often as he changes his socks, resulting in a relatively tranquil political environment. Although economic disparities remain enormous, and a small group of oligarchs dominates the economy, Russia is in the midst of its fifth consecutive year of economic growth, inflation is under control, and the ruble—once the currency equivalent of a late-night-show punch line—is strong. Perhaps more important, Putin has made Russia's progress toward a market economy almost irreversible, in part through a string of impressive economic reforms, like implementing a flat tax, and a range of other important changes to the country's economic infrastructure, such as land, pension, judicial, and labor reforms.

Putin's dark side—the one that Bush will pretend to not see—is his budding authoritarianism and his ever-closer association with the siloviki, a powerful group of former KGB and law enforcement officials. Putin has severely limited freedom of expression: Reporters Without Borders ranks Russia 121st out of 139 countries in its worldwide press freedom index, and a few months ago Russia's last independent national TV network was replaced with a state-sponsored sports channel in a final blow to national private television. Putin has made meddling in the electoral process an art and destroyed any attempt to balance power between branches of government. The brutal war in the breakaway territory of Chechnya regularly features astonishing infringements of basic human rights. But as the head scientist in two ongoing large-scale democracy-building experiments in Afghanistan and Iraq, the United States can't afford to look away as Russia retreats from democracy. Putin's ongoing attack on Yukos Oil Company, Russia's largest company and soon to be the world's fourth-largest oil producer, is a vivid illustration of what the Bush government is choosing to ignore.

Back in early July, the top associate of Mikhail Khodorkovsky, the CEO and principal shareholder of Yukos, was thrown in jail and charged with fraud relating to the 1994 privatization of a fertilizer company. Soon thereafter, Yukos and some of its employees were hit with charges of bribery, murder, and corruption, and Khodorkovsky himself was pulled in for questioning. But the charges were just a front. Khodorkovsky's real crime was his violation of an informal deal whereby Putin agreed to turn a blind eye to the questionable manner in which Russia's oligarchs acquired their assets as long as the businessmen kept their noses out of politics.

Rewind to the mid-1990s, when a bevy of well-connected political insiders acquired Mother Russia's assets for kopeks on the ruble in a series of rigged privatization auctions. Khodorkovsky acquired Yukos—which at the time controlled close to 2 percent of the Earth's total known oil reserves—for the piddling sum of $309 million. Over the next several years, Khodorkovsky and his fellow oligarchs parlayed their booty into real money: Ten of them now have a total net worth of more than $1 billion; Khodorkovsky tops the list at $8 billion.

Khodorkovsky's fatal flaw was his craving for power and respect that mere lucre cannot buy. Earlier this year, he began to fund a range of parties for the December Duma elections (Russia's lower house of parliament) with an eye toward building a faction that might, for example, oppose the government's desires to, say, raise taxes on oil producers. Khodorkovsky also courted foreign business and political leaders, casting himself as the leader of a new generation of Western-focused Russians and making a point of cultivating contacts with members of the Bush government. He also didn't contradict the (partly self-generated) rumor that he was planning a run at the presidency in 2008 upon the constitutionally mandated end of Putin's last term.

But then the siloviki, Putin's former KGB buddies, stepped in. With the tacit agreement of Putin (his denials of involvement in abetting the crackdown don't hold much water), the siloviki orchestrated the charges against Khodorkovsky and his company to warn other would-be oligarchs-cum-politicians to stick to their knitting. Allowing Khodorkovsky to break the rules that Putin established would—in the control-obsessed minds of Putin and his cronies—lay the foundation for other rich businessmen to get into politics, threatening Putin's position of supremacy. Khodorkovsky's power play would also make it more difficult for Putin to play kingmaker upon the end of his second term.

In response, Khodorkovsky decried political persecution and pledged to continue funding Duma candidates. In early September he bought a newspaper and signed up as editor in chief a longtime critic of the Putin government. His fellow oligarchs, wary of being targeted next, offered to pay more taxes—and offered no support to Khodorkovsky.

In the meantime, the scandal has faded from the headlines, replaced by rumors of the imminent purchase of a minority stake in Yukos by a Western oil company. (One of the likely objectives of a recent visit to Russia by former U.S. President George H.W. Bush was to assess Putin's receptiveness to such a transaction, as he may not want Khodorkovsky to have the political cover that an international minority investor would bring.) Putin, meanwhile, has studiously avoided addressing the substance of the Yukos crisis.

Khodorkovsky is no stranger to stamping on others' toes to get what he wants. But the Yukos dispute is more than a case of the Russian president disciplining a rowdy businessman. In a perfect political system, Mikhail Khodorkovsky would be able to play a role—in line with established and uniformly enforced rules and regulations—in influencing Russia's political path. Russia's evolving democracy is far from perfect, but Putin has abandoned even the pretense of striving for such a system. By closing its eyes to this, the United States is undermining the pretense that cultivating democracy is a foundation of its foreign policy. Ignoring the blatantly undemocratic governments of Pakistan and Saudi Arabia is one thing, but giving Russia—which isn't as important an ally in the battle against terror—a pass as well carries the stench of flagrant hypocrisy.

On another front, as Putin chips away at Russia's still-nascent democratic underpinnings, he's threatening the economic reforms that comprise his government's key achievements. The economic subtext of the Yukos affair is whether the privatization process through which Russia's oligarchs acquired their wealth is subject to ex post facto modification. At this point, a wholesale re-evaluation of privatization appears unlikely. But reopening the wound of privatization has raised uncomfortable questions about the future of property rights and, much more broadly, the rule of law in Russia.

Several years ago, when referring to a policy effort, former Russian Prime Minister Viktor Chernomyrdin dryly remarked, "We wanted it to be better, but it turned out the same as ever." The danger is that the same may hold true for Russia's democratic underpinnings, with the United States as a silent partner.

#916, Tuesday, November 4, 2003


Winners and Losers in Yukos Affair

By Yulia Latynina

A coup d'état has taken place in Russia. The law enforcement agencies have seized power. Everyone knew the coup was coming. And President Vladimir Putin did nothing to stop it.

The coup came in the form of the detention of Russia's richest citizen, Yukos CEO Mikhail Khodorkovsky.

You can't say that law enforcement was dead set on staging a coup. The Prosecutor General's Office made perfectly clear to Khodorkovsky that it was time for him to leave the country. The offices of Anton Drel, the lawyer who represents Platon Lebedev, were searched, and Drel himself was questioned. Lawyers' offices weren't searched even during the Soviet era. Chekists arrived at the school where Khodorkovsky's 12-year-old daughter is a student and demanded her file. Even in the criminal free-for-all of the early 1990s, children were considered off-limits.

A blind man could have seen this coming. But Khodorkovsky didn't get the message. He dug his heels in, preferring to become a political prisoner rather than go into political exile. By doing so, Khodorkovsky paradoxically won this round in his psychological bout with the authorities. Things went according to his plan, not the prosecutors'.

For this very reason, the prosecutors were hesitant to arrest Khodorkovsky. They knew very well that this was not a pretrial detention. This was a coup in the political system. Previously the system had stood equally on the old oligarchs and the new "St. Petersburgers"; henceforth it would stand on the St. Petersburgers alone.

As a rule, victims of coups and revolutions are those most responsible for causing them. Had Paul I not been mad, and had Nicholas II not been spineless, the former would not have been strangled in his bedchamber and the latter would not have been executed and thrown down a mine shaft. The same applies to the oligarchs: if they weren't so greedy, they wouldn't be under the gun.

Back in the late 1980s, when the future oligarchs were just getting started in a frenzy of dirt and blood, each faced an impossible task: dealing with the thugs who walked into their offices, stuck guns to their heads and demanded money, without turning into thugs themselves. They solved this problem by amassing security forces and privatizing the state along with the cops and the prosecutors.

They took care of the thugs and the "red directors." They got their man elected president in 1996 by raping the country and denying it the necessary vaccination in the form of a weakened, moribund culture of communism. Then, instead of disarming and disbanding their privatized police forces, the oligarchs began to battle one another. They taught the prosecutors how to use criminal investigations to pry factories away from their owners.

They created a Frankenstein monster but the monster did not obey his master for long. "Why work for them when I can work for myself?" the monster thought to himself. And when the oligarchs decided to become squeaky clean, it was too late. The crud had hardened and it wouldn't wash off.

The victims of a coup are always those most responsible for bringing it about. But the reverse is also true. Those who stage a coup always become its hostages, like NKVD chiefs Yagoda and Yezhov, executed by the man sent to replace them.

Two things happened last Saturday, one obvious, the other less so. Mikhail Khodorkovsky was obviously deprived of his freedom, perhaps temporarily. Less obviously, Putin lost power.

Until now, Putin had played the old oligarchs off against the new St. Petersburgers, and as a result he had access to full information about what was happening in the country. No longer. Soon he will get his information from the same source as the rest of us - the TV news. And the news anchors will assure him that the workers worship him and that his ministers hang on his every word.

The loss of information is itself a loss of power.

Kremlin clan feuds performed the function of a separation of powers. When the president relied on the old oligarchs as well as the new St. Petersburgers, he was the master of both. By allowing one of the clans to be destroyed, he has become the hostage of the other. When a plane loses a wing, it spins out of control.

And loss of control is loss of power.

In a country where the Prosecutor General's Office detains Khodorkovsky, beat cops will feel free to shake down every last shop owner. This leads to capital flight. In the third quarter of this year alone, the outflow of capital amounted to approximately $8 billion, compared to total outflow in 2002 of just $7.4 billion. The country is going broke. Rich countries can afford presidents. When countries hit hard times, only a dictator will do. And dictators are always the hostages of their own corrupt government machines.

If by "power" we mean the possibility of imprisoning absolutely anyone, then of course Putin has retained power. If we mean the capacity for running the country, however, Putin has lost power. You can't control a plane that has gone into a nose dive. But you can eject people from the cockpit or shoot them right there in the cockpit.

Khodorkovsky has been detained. And yet, paradoxically, by allowing himself to be detained he has for now retained his freedom of choice and his freedom to carry on fighting in the war between business and the authorities. Not that he stands any chance of winning.

The Putin regime has lost its freedom.

Yulia Latynina is a presenter of "24" on RenTV.