John Ransom
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From the mid-1980s until 2003 Mikhail Khodorkovsky used his connections first developed as a rising young communist in the Soviet Komsomol youth movement to amass a private fortune created through banking and oil in Russia. He used his experience and connections in import-export at the top of the communist hierarchy to create one of Russia’s first private banks in the post Soviet era. He then parlayed the bank’s assets into the purchase of the state owned oil producer Yukos for $300 million. Some have said that the low price for the oil producer was arranged by Vladimir Putin, who was then in charge of foreign investments in the St. Petersburg region.

I remember that it was during this period that Russian investment bankers were being killed on the streets in St. Petersburg, ostensibly for not partnering with the right “people.”

The chair of the US House of Representatives committee on Foreign Relations, Benjamin Gillman, said during a hearing in 1997: "Organized crime groups, particularly in Russia, now have an almost chock hold on the country's vast natural resources, as well as their banks and media. Russia has been described recently by the press as a cryptocracy from top to bottom, a semi-criminal state."

And through it all Mikhail Khodorkovsky continued to prosper and grow.

No hair on his head was touched.

By 2003 Khodorkovsky personal fortune was estimated at $15 billion.

And then his luck ran out.

By then Vladimir Putin had taken power.

Putin too had taken a similar path to power. He served as a kind of community organizer inside the KGB, first in the East Germany, and then after the collapse of the Berlin Wall at Leningrad State University and what is now known as St. Petersburg.

Along the way he used his communist connections to amass political power, first under the mayor in St. Petersburg and then subsequently under Boris Yeltsin in the presidential administration.

He eventually succeeded Yeltsin in 1999 as president when Yeltsin resigned as his health and vast quantities of alcohol diminished his intellectual capacities.

By 2003 Putin, as president of Russia, had consolidated power more than any leader since Brezhnev.

Thus he began to resent attempts by oligarchs like Khodorkovsky to promote a more democratic Russia.

The Western press had long denounced insiders like Khodorkovsky for plundering and exploiting the Russian economy. But that was about to change.

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John Ransom

John Ransom is the Finance Editor for Townhall Finance.
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