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Kakha Bendukidze. Photo:

By 2004, Kakha Bendukidze had satisfied his business ambitions and could credit himself with some success in his lobbying activities. But Bendukidze was also very aware of the changing climate in Russia, with the government increasing its control over big business. In October 2003 Russia's most influential oligarch Mikhail Khodorkovsky was arrested on a runway in a Siberian airport on charges of fraud and tax evasion. In 2004, Forbes still named him the richest man in Russia, with an estimated net worth of USD 15 billion.[122] Khodorkovsky himself stated in a 2005 interview with Ekho Moskvy radio station:

"I am convinced that I was put in prison not because of politics but because they wanted to take Yukos away. Politics was just a pretext. If I had not helped oppositional parties in 2003, they would have found a different pretext."[123]

Unlike Khodorkovsky, who had turned into an outspoken advocate of political liberalism and civil liberties, Bendukidze concentrated on promoting economic liberalisation. Nevertheless, the state's growing influence, accompanied by the strengthening of the role of such state-controlled enterprises as Gazprom, went against Bendukidze's libertarian beliefs. The progressive nationalisation of strategic industries also signalled to Bendukidze that the government was taking a more assertive, even hostile, position towards big business, and that his own business interests were at risk.

Mikhail Khodorkovsky
Imprisoned: Mikhail Khodorkovsky, a Russian oligarch
and former owner of Yukos. Photo: unknown

Already in 2003, Bendukidze felt the impact as his company made inroads into the jealously guarded nuclear energy sector. In 2003, OMZ purchased a controlling stake (53.8 percent) in Atomstroiexport (ASE), the Russian monopolist in construction of nuclear plants abroad.[124] This turned the government into a minority shareholder in a deal strongly opposed by the Russian Nuclear Ministry.[125] In February 2004, Bendukidze resigned from the position of the President of the JSC Atomstroieksport.[126] In the following year, he would sell his share in OMZ to Gazprombank, which would then hand OMZ's nuclear assets back to the state.

Kakha Bendukidze
Kakha Bendukidze as a new designate Economy Minister,
June 2004. Photo:

In late May 2004, Kakha Bendukidze arrived in Tbilisi as a member of the Russian delegation to the Russian-Georgian Economic Forum,[127] which took place during a positive period in the relations between the two countries. It was during this event that he was invited to a private meeting with President Saakashvili and the late Georgian Prime Minister Zurab Zhvania. That Bendukidze attracted the government's attention was not surprising – he was Georgian, wealthy, and well known as a vocal advocate of liberal economic reforms. The four-hour conversation resulted in Saakashvili and Zhvania offering Bendukidze the chance to become Minister of Economy and coordinate the reforms himself.[128]


[123] "Interview with Mikhail Khodorkovsky" (in Russian), Ekho Moskvy, 9 September 2005.

[124] Atomstroieksport (ASE) established in 1998, is a Russian company that constructs nuclear plants abroad. ASE has built over 10 nuclear plants in Eastern Europe, Finland, and Asia. In 2003, the company was the general contractor for nuclear plant construction projects in India ("Kudankulam"), China ("Tiangwan"), and Iran ("Busher"). Among ASE's subcontractors there are tens of Russian engineering and construction companies. In 2002, ASE's turnover reached approximately 640 million USD, and the portfolio of orders reached about 2.9 billion USD.

[125] Yekaterina Godlevskaya, "Gazprombank Relinquished Atomstroiexport" (in Russian), RBC Daily, 21 January 2009.

[128] Alexander Bekker, "Interview: Kakha Bendukidze, the Minister of Economy of Georgia: 'Georgia Has Nothing to Lose'" (in Russian), Vedomosti 93 (1133), 2 June 2004.

Suggested readings

In "What Does Russia Think," a collection of essays by influential Russian intellectuals published by the European Council on Foreign Relations in September 2009, Olga Kryshtanovskaya provides her account of Russia's resurgent authoritarianism:

"After the Yukos case, the business community was forced either to accept the new reality in Russia or to leave the country. It was now in effect forbidden for business people, or for that matter any other significant social group, to directly intervene in politics. The Kremlin even believed, for example, that those who, like Khodorkovsky, who worked for charity, did so simply to improve their image and could therefore constitute a potential danger at the next election. The function of the grand bourgeoisie was to remain silent and only to sponsor projects initiated by the Kremlin." (pp. 27-28)

On the changing power balance between the Russian state and the oligarchs during Putin's presidency, see the 2003 essay by Marshall Goldman "Render Unto Caesar: Putin and the Oligarchs":

"In 1991, a small group of Russians emerged from the collapse of the Soviet Union to claim ownership of some of the world's most valuable oil, natural gas, and metal deposits. This resulted in one of the greatest transfers of wealth ever seen. By 1997, five of these individuals, who in the 1980s had only negligible net worth, were listed by Forbes as among the world's richest billionaires."

Articles by Lilia Shevtsova on how Russia has changed can be found on the website of the Moscow Carnegie Center. Also useful is her book Russia – Lost in Transition from 2007. She describes Russia's liberal technocrats as "the liberal adornment of an illiberal, undemocratic regime":

"The liberal technocrats in Russia deserve consideration. These are free marketeers who consent to work in a less-than-democratic, or even blatantly undemocratic, system under the direct patronage of the leader. They are to be found in many countries, from Saudi Arabi to China, and from Singapore to Argentina. In most cases, they serve a useful purpose, obstructing both the expansion of the bureaucracy and populist policies … their role is constructive, however, only if there are other political forces with a developed liberal democratic sensibility to mitigate the technocrats social insensitivity and excessive managerial zeal … Technocrats without redeeming democratic support operate equally well in the interests of authoritarianism or oligarchy." (p. 113)

She also notes, in a comment relevant for Georgia, that in Russia, "liberalism will have no prospects if those who claim to be its adherents once more try to argue that democracy is a hindrance … neglecting democracy, as the 1990s showed, causes liberalism to degenerate."

Bendukidze gave a number of interviews in Russia in his new capacity as first Economy and then Reform Minister in Georgia. Soon after his ministerial appointment in June 2004, he spoke with Russian business daily Vedomosti ("Georgia Has Nothing to Lose" – «Грузии нечего терять») (also available in English) outlining his initiatives and views on Georgia. In this interview he argues that for Georgia, a very poor country, the only way forward is radical economic liberalization. He also set out his goal of tripling Georgia's GDP within 10 years.

April 2010

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