Russia, it seems, is going back to the bad old days (to whatever extent that they ever left them).

     I recall Yuri Maltsev, a former advisor to Michail Gorbachev, and one of the architects of Glasnost, discussing the matter at the ISIL conference in Vilnius, Lithuania in 2003. He was disgusted by the fact that the weak Russian reforms and half-way measures failed to address vital and fundamental issues necessary for a functioning market economy – things like e.g., property rights. He defected to the US in 1989.

     This failure was to have predictable results.

     An ominous event that raised a warning flag about the direction Russia was taking was the nationalization of Yukos Oil and the jailing of Yukos executives Mikhail Khodorkovsky and Plato Lebedev in late 2004. The excuse given was non-payment of taxes – but in fact it turned out to be a matter of plain unadulterated government thievery. One other unpublished reason Khodorkovsky is in jail is the fact that he had been providing financial support for freedom movements throughout Russia.

     The seizure of Yukos was part-one in a move towards state domination of the oil industry in Russia. Yukos' main production unit, Yuganskneftegaz, was sold to the state-owned Rosneft (and financed, we are told, through $6 billion in loans from China). Rosneft is now merging with the state-owned natural gas company Gazprom to form a giant state monopoly in energy.

     Vladimir Putin's top economic adviser Andrei Illarionov, a strong proponent of market economies and an admirer of Ayn Rand, was outraged and called the Yukos fiasco the "swindle of the year". He warned that Russia is on its way to joining the Third World economically as a result of this blunder. He was demoted almost instantly for his remarks. In less kinder, gentler times he would probably have been "disappeared."

     Yuri Trutnev, the Russian Minister of Natural Resources stated that he will prevent western firms from bidding on exploration of Russian natural resources.

     Needless to say, this and the Yukos fiasco has had a chilling effect on western investment in Russian oil markets. Exxon and Total (a French firm) are reported to be scaling back their operations significantly and last year flight capital out of Russia amounted to roughly $12 billion.

     It has also become dangerous politically. We had planned to hold our world conference this July in St. Petersburg, Russia, but with the deteriorating political climate we decided to change venues. Andrei Illarionov had been our point man in Russia for the conference – so with his fall from grace with Putin, it put a cloud over arrangements. Also, one of ISIL's directors who had made donations to a Russian freedom group was banned from entering the country. We were also informed that the Russian LP and at least one think tank closed their doors for fear of their lives.

     We are optimistic for the long-term in Russia, due to many changing cultural factors, but the current climate will definitely set the freedom movement back for some years to come.