The price of Russia's 'dictatorship of law'

The contract-style killing of Novaya Gazeta correspondent Anna Politkovskaya this past weekend has caused shock and outrage in the human rights and journalistic communities in Russia and abroad. While thousands attended her funeral Tuesday, the Russian government was apparently represented only by a deputy minister of culture. The significance of her death can only be understood within the context of recent developments in Russia that must not be ignored by foreign political and business leaders.

Ms. Politkovskaya's assassination cannot simply be regarded as retribution for her reporting about atrocities committed by the Russian armed forces in Chechnya or her critical assessment of Russian President Vladimir Putin's policies. Rather, her murder – the 13th contract-style murder of a Russian journalist since Mr. Putin came to power in 2000, according to the Committee to Protect Journalists – is the latest example of the lawlessness in Russian society.

This state of affairs is a by-product of a conscious effort by prominent individuals representing powerful interest groups to intimidate the opponents of the political and economic order, as well as to drive foreign competition in the natural resource and financial sectors out of Russia.

Last month, Russian Central Bank Deputy Director Andrei Kozlov was murdered in Moscow. Mr. Kozlov was widely regarded as a supporter of further economic reform and opening up the country's banking sector to increased competition, including from foreign banks. Earlier this month, Enver Ziganshin, the chief engineer for the Anglo-Russian oil producer TNK-BP, was gunned down in Siberia – perhaps as a warning to BP.

Mr. Ziganshin's killing took place shortly after Russia's government jeopardized Shell's multibillion-dollar oil-development investment in the Sakhalin II fields by revoking a critical license. The Russian authorities allegedly took this step on the grounds that Shell had caused significant harm to the environment. This action has been met by a great deal of skepticism given the generally weak enforcement of Russian environmental regulations.

After becoming president six years ago, Putin promised to end the disorder of the Yeltsin era and establish a "dictatorship of law." This phrase was ambiguous then. Not so today. Given Putin's time as a KGB agent and his education as a lawyer, it's clear that he envisioned a "Bismarckian" model that would combine a rule-based society with an expanded safety net. The presumption was that Russians, raised in the communist Soviet Union, would be willing to give up civil rights in exchange for economic growth and stability in their daily lives. But Putin has largely failed to deliver as expected.

The Russian government has pursued a course of taking direct or indirect control of much of the country's natural-resource sector under the guise of law. Consider the government's heavy-handed tactics toward Mikhail Khodorovsky's Yukos oil company in recent years.

Today, those who know how Russian state policy is determined and who controls it are limited to a small group in the Kremlin. Analysts note that some 6,000 former KGB officials hold key positions in the Russian government at a time when power is increasingly centralized in Moscow.

It is not clear that Putin has the power to set policy unilaterally. He faces pressure to accommodate the interests of the siloviki – the powerful senior figures in the Federal Security Service, the military, and the Ministry of the Interior.

Two likely explanations for recent events is that either Putin has sanctioned deliberate policies, or his lame-duck status – his term is scheduled to end in 2008 – means that he no longer has the power to ensure domestic order, or set the direction for Russia's foreign policy. The latter may explain Russia's increasingly disturbing policies toward Belarus, Iran, Georgia, Moldova, and Ukraine.

Russia's direction is making many governments nervous. Private-sector attitudes are likely to change, too. Companies should think twice about making large investments in unstable countries without a well-established rule of law.

For Russia to attract both domestic and foreign investors, its legal and corporate governance must become more transparent and accountable. This will not occur without an independent press that reliably reports about conditions that affect commerce – or if the Russian government continues to intervene on behalf of its political favorites. It cannot live on energy exports alone, especially given its falling population.

If current conditions persist, only those who have good political connections with the Russian ruling elite will be willing to be active in the country's economy. In some respects, this may resemble centralized control over economic activity and political life as it was in the not-so-distant past.

• Ethan S. Burger is a scholar-in-residence at American University's School of International Service and an adjunct professor at Georgetown University Law Center in Washington.