What does Putin Hope to Gain by Releasing Khodorkovsky?

On Thursday, in a move that surprised many Russian businessmen, Russian President Vladimir Putin announced that he was considering offering a pardon to the former oil tycoon Mikhail Khodorkovsky; on Friday morning the pardon was signed and Khodorkovsky walked free.

It is believed that this decision by Putin is intended to reduce the criticism being levelled at the country as international attention has turned to Russia, and its questionable human rights violations, ahead of the Sochi Olympics (the Winter Games), set to begin next February. By releasing the former oligarch, Moscow hopes to be seen as a more compassionate power.

Khodorkovsky was once the richest man in Russia, and the former Chairman and CEO of the Yukos oil company, but after supporting opposition political parties the Russian government began a campaign against the company that froze many of its assets, made new tax claims, and eventually saw it bankrupted in 2006. During the campaign Khodorkovsky was imprisoned on charges of fraud and tax evasion. The Parliamentary Assembly of the Council of Europe declared that the campaign against Yukos and Khodorkovsky was politically motivated and violated human rights.

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Khodorkovsky has always claimed that he would not request a pardon as that would imply he had been guilty in the first place, however Putin has now claimed that he recently received a request signed by Khodorkovsky claiming that “he has already spent 10 years behind bars – it's a serious punishment. He mentions humanitarian considerations, as his mother is ill. Given all this, the correct decision should be taken and a decree on his pardoning will be signed very soon.”

Edward Mermelstein, a lawyer who advises on cross-border investments in Russia, explained to CNBC that Khodorkovsky “has not kept quiet while in prison. He will not change post release. This is an obvious liability for Putin, but one that has been calculated to benefit him in the short term.”

Other than creating a more favourable international image ahead of the Sochi Olympics, it is likely that Putin released Khodorkovsky in order to gain political support and placate the Russian business community ahead of new economic regulations and reforms that are expected next year. Russia’s tax structure has always made it very lucrative for its wealthy citizens to invest outside of the country, but Putin is looking to change this and threatens to close any banking institution that doesn’t conform to these new regulations, a move that will undoubtedly anger a lot of rich business with political influence.

Now that he is free it is possible that Khodorkovsky will use the opportunity to speak out and explain how Russia, and other countries, may be manipulating financial systems. The potential for him to divulge state secrets and schemes has even drawn some to compare him with Edward Snowden.

By. James Burgess of Oilprice.com