1. What is your understanding of the notion “oligarchy”? What does the assault on Yukos mean for Russian business, politics and power?

"IT FEELS like we're being toyed with – like a baby seal being batted back and forth by killer whales." Thus one Yukos employee describes the sensation inside the company that was once the alpha whale of the Russian oil industry, but is now gasping to stay afloat under a barrage of legal assaults. This week, while it became clearer that the firm could keep on pumping oil, less happily the tax ministry began looking for tax evasion in 2002 and 2003, to add to the nearly $7 billion it wants in back taxes for the previous two years. Last week prosecutors charged Leonid Nevzlin, one of Yukos's main shareholders, who now lives in Israel, with conspiracy to murder.

Foreign-investment analysts are feeling pretty seasick too. Since the attack on Yukos and its then boss, Mikhail Khodorkovsky, began over a year ago, many have assumed that the goal was to punish him for his political influence-peddling, and probably to separate him from Yukos, but to leave the firm undamaged and in private hands. Harsh on him, perhaps, but not bad for the economy, and not – as native Russian observers were more wont to say – an asset-grab by Kremlin cronies. Yet recent announcements hint at a new plan: to break Yukos up and sell it off at artificially low prices, with the main production subsidiary, Yuganskneftegaz, perhaps going to the state oil firm, Rosneft (whose new chairman, Igor Sechin, is one of President Vladimir Putin's closest aides). If that happens, says a gloomy Al Breach of Brunswick UBS, usually one of the most upbeat foreign analysts, "it would be hard not to conclude that the Kremlin's key motivations are personal power and wealth".

Yet the end for Yukos has not yet come and may not for a while. Bailiffs last week seemed to backtrack by giving Yukos another month to pay its $3.4 billion tax bill for 2000. This still seems impossible. But the move allows room for negotiations that are rumoured, yet again, to be on. Yet such talks will only decide what, if anything, Yukos's owners will get for the firm, and how long Mr Khodorkovsky and his business partner, Platon Lebedev, must sit in jail for alleged fraud and tax evasion. And the delay could just be to allow the more important, far murkier negotiations in the Kremlin over who gets the spoils.

Presidents and precedents

Mr Putin may well have hoped for a quicker, quieter and tidier solution. But his aloofness (except for an occasional soothing but empty statement) as the battle with Yukos escalated has taught investors two things about him that they hoped were not true. One is that he would rather unleash full-blown market panic than back down and lose face. The other – not yet proved, but increasingly suspected – is that he is willing to allow some renationalisation. This raises big questions. Are other firms safe? What is the state's future role in the economy to be? And who will benefit?

In the big picture, who owns Yukos may matter little. Indeed, says Yakov Pappe of the Russian Academy of Sciences's Institute of Economic Forecasting, nationalising Yukos – if it were done right – would correct a mistake made during the privatisations of the 1990s. Rosneft was intended to be one of a few big oil firms, but ended up as one of the smallest of many.

There have been signs for months, says Chris Weafer at Alfa Bank, that the state wants a bigger role in oil. Russia is the world's biggest oil producer and second-biggest exporter, after Saudi Arabia. Yukos alone pumps 2% of world output, more than Libya. When it threatened to stop pumping last week, claiming that a court had ordered it to, it helped to push up world oil prices to their current highs (see page 68). Nationalising Yukos would give Russia the strategic leverage in oil that it enjoys in gas, which the state-controlled monopoly Gazprom sells to nearly all of Russia's neighbours and most of Europe.

Whether the assets of Yukos go to Rosneft, a Kremlin-friendly private firm such as Surgutneftegaz, or a proposed new oil subsidiary of Gazprom, may now be the focus of Kremlin infighting. Rosneft is already pulling its weight, in partnership with foreign firms, exploring for deposits off Sakhalin island in the far east. Similar joint ventures may be ordered to explore the untapped reserves of Eastern Siberia.

But private firms, hitherto lazy about exploration, may also be encouraged by the Kremlin to take up the burden, says Alexei Mukhin, of the Centre for Political Information, a think-tank. Given Yukos's fate, they will respond quickly to that encouragement. Firms in other sectors, too, will pay more heed to official wishes. Thus, says Mr Mukhin, the Kremlin is ushering in a form of "state capitalism".

When Mr Putin came to power, many predicted that he would replace the "oligarchs", the business cabal that had formed around his predecessor, Boris Yeltsin, with his own men. Vladimir Gusinsky and Boris Berezovsky, two media moguls who got in his way, had to go into exile, and several other businessmen capitulated after prosecution threats. Mr Khodorkovsky was part of another potentially troublesome group, says Mr Mukhin, that included Roman Abramovich, an oil man and now English-football tycoon, and Oleg Deripaska, an aluminium baron. "The way is now open for Deripaska to be next – though that does not mean it is going to happen," says Mr Mukhin.

But Mr Putin, it seems, did not declaw one set of monsters only to create another set. People originally tipped to be future Putingarchs – such as two bankers, Vladimir Kogan and Sergei Pugachev – have continued to prosper, but have not become billionaires, nor won government posts. Those officials with suspected business ties are smaller fry; and the most notable ones, Leonid Reiman, the communications minister, and Mikhail Lesin, the former press minister and now presidential adviser, even predate Mr Putin.

There are incipient potential oligarchs, such as Alexei Mordashov of Severstal, a steel firm, one of whose former executives is now minister of transport. But the main new power-brokers, says Mr Mukhin, are not oligarchs but "overseers": people such as Rosneft's Mr Sechin, his Kremlin boss, Dmitry Medvedev (on the board of Gazprom) and other advisers to Mr Putin with control over state firms.

The fear is that although, unlike the oligarchs, these men are theoretically beholden to Mr Putin, the opposite may prove true. "Without counterweights and a separation of power, Putin may end up under the influence of the people around him, always consulting him and telling him he is the master of everything," says Yevgeny Yasin, head of the Higher School of Economics. These bureaucrats, he says, are "people who believe that their job is defending the state's interests and that business is a bunch of thieves."

Yevgenia Albats, a journalist and political scientist who specialises in the siloviki, the former members of the security services who make up Mr Putin's inner circle, concurs: "The problem is not that the state is taking control, but that the silovik culture is taking control." Many of Mr Putin's allies, she says, are second-rate ex-KGB officers with no business skills who now have positions of power, "a government of the mediocre". And, says Olga Kryshtanovskaya, a sociologist, their influence in smaller, private firms and through lobby groups in parliament is growing too.

With such a group on top, Russia faces continued conflicts between the bureaucracy and big business, fought out through a biased judicial system. That has "depleted trust between business and the state," says Mr Yasin, and will encourage local politicians and officials to use the same methods, delaying the creation of the rule of law still further. And as with the oligarchs in the 1990s, the risk is that the (private) interests of the overseers and those of economic policymaking will become hopelessly entangled. The difference is that, with government an increasingly hermetic place, it will be harder than ever to tell the two apart.

1. influence-peddling – лоббизм

2. to backtrack – отступать, менять курс

3. to get spoils – получать выгоду, прибыль

4. to pull one’s weight – честно выполнять свою долю работы

5. untapped reserves – скрытые резервы, неиспользованные резервы

6. to pay heed to smth. – обращать внимание на что-л.

7. a cabal – клика, группа заговорщиков, кучка интриганов; заговор, тайный сговор

8. to go into exile – эмигрировать из страны (преим. по политическим мотивам)

9. a small fry – мелкая рыбешка, мелкая сошка

Ex: a small-fry politician – мелкий политикан

10. power brokers – влиятельные политические лица; политические воротилы, руководящие за сценой

11. to be beholden to smb. – быть обязанным, признательным кому-л.

12. mediocre – посредственный, заурядный, бездарный, среднего качества

Ex: mediocre people – бездарные, заурядные люди

to rise above the mediocre – подняться над посредственностью; быть выше среднего уровня

13.to tell apart – понимать разницу, различать

Ex: to tell two things apart – различать две вещи

Business: The survivor; Face value

The Economist. London: Aug 13, 2005.Vol.376, Iss. 8439; pg. 54