Karina Orlova: Vladimir Putin often accuses the United States of trying to dominate the world—expanding its influence, and constantly pressing others. I’m paraphrasing an article authored by the Russian President, recently published in the Italian newspaper La Stampa. At a conference in Helsinki last week, you were elected to lead the newly created civic political oppositional movement called Open Russia. As a newly minted politician, how do you see the U.S. role in the world, and specifically its relations with Russia? How do things stand now, and how, in your opinion, should they be?

Mikhail Borisovich Khodorkovsky: No matter what, I always see myself as a public policy figure, because I’m not looking to get elected anywhere. I’m looking to create an environment that could lead to the kind of changes in Russia that seem right to me. From this point of view, American dominance today is already not at all what it was twenty years ago—obviously—and is more like a little island of stability. It would be extremely important for America not to overextend itself, because if its role in the world is broken at some point, the changes that will take place in the world will be too rapid and too dramatic. I don’t think anyone in the world needs that—certainly Russia doesn’t. In that sense, unlike Putin, when I look at the world today, I do not see America dominating anyone, but as one of several global powers. And I consider its influence to be a positive force, one that imparts a necessary stability to the world.

KO: And how do you think Russia ought to structure its relations with the United States?  How should Russia understand America? Because it’s obvious that today’s relations don’t suit the Kremlin.

MBK: Well no, why do you say that? Russia is more than fine with its relations with Washington today. It’s very important for the Kremlin to have a foreign enemy big and strong enough for the regime to blame everything on, and secure enough so that it won’t pay attention to the Kremlin’s attacks and provocations and react to them. Because if, heaven forbid, it would react, then it would turn out that the Kremlin doesn’t have much leverage in this fight. Precisely this kind of America was very convenient for the Kremlin, insofar as Moscow saw Hillary winning the presidency. Had she won, this model of a formidable but ultimately safe enemy would have been built up very nicely. But of course, they may have miscalculated in thinking Donald Trump to be a better friend than he really is. And now, after that wonderful standing ovation in the State Duma [Russia’s parliamentarians were celebrating Trump’s victory – Ed.], I personally am very curious to see just how they intend to turn it all around and spin Donald Trump’s America as the main enemy again. This is going to be an interesting thing to watch. But I am confident Russia’s propagandists will be up to the task.

KO: Did you think Hillary or Trump would win?

MBK: Well, I saw Brexit up close [Khodorkovsky resides in London these days – Ed.], and so when I saw a small margin in the polls for Hillary, I understood Trump would win. The exact same thing happened in Great Britain during Brexit. Those who were against the country leaving the European Union had a tiny lead in the polls, but the electoral base of those who were in favor of leaving was easier to mobilize. And we saw the same situation in the United States with Trump’s base: the white Anglo-Saxon Protestant voters were more mobilized than Clinton’s voters. When polls predicted a tie, it was obvious that those people were going to win. Of course, this shift happened only during last weeks before the election. Before that, the situation was unclear.

Damir Marusic: We watched Brexit too, and it was a surprise when it happened. But this election here, it was a real shock—a revolution. In retrospect, however, maybe it shouldn’t have been. Looking at Europe, the continued success of the populists in France, Italy, Hungary, the Netherlands—this is something new, part of a broader pattern. The Economist recently wrote that “Mr Putin is much more the embodiment of the spirit of his age than is the outgoing American president, Barack Obama.” What do you make of it all?

MBK: Well, what has been going on in the West in recent years? Institutions have started to replace individuals—to replace leadership. Leadership has started to disappear. On the one hand, this appears to be not such a bad outcome: institutions are thought to be more predictable and reliable when they are not dependent on a single person. Institutions are supposed to reflect and advance the people’s true interests. That all sounds wonderful, but it is a mistake to think that way.

I always use the following example: If you are not a designer and don’t have impeccable taste, you are hard-pressed when you are asked what color wallpaper to put up in a room. But if a professional designer chooses the wallpaper for you, you come in and say, “Wow, this is exactly what I wanted!” Similarly, the people cannot always express what it is they want, and they look for that person, or that system, that can help them. That is to say, along with institutions, you have to have good leadership. But that leadership has gone missing. Traditional parties in the West, including in the United States, no longer provide real leadership. That leadership now only exists on the fringes. And thus, for want of the designer I mentioned, people have started looking in those kinds of places for true leadership. And here you have the result.

DM: Right after the election, Masha Gessen wrote an article drawing on her experience watching Putin come to power in Russia. In the article, she instructs her readers to watch for signs of creeping authoritarianism for during Trump’s term as President.

MBK: I unfortunately haven’t read Gessen’s column, but I intend to. In any case, I wouldn’t start comparing apples and oranges. Going back to my earlier example of the designer—that’s different from being put in jail and being told what to wear, being told that your wants and desires don’t matter. What we have in Russia is not leadership. Putin is not a leader; he, too, merely reflects society’s opinions. Putin pulls together his electoral support by taking the most negative emotions in society, amplifying them, and reflecting them. That is not leadership. Leadership is when after one has built up electoral potential, one moves society in a direction it might not be ready to move quite yet—a direction necessary for development. And this is exactly what Putin is not doing. Conversely, this is exactly what Angela Merkel is doing today. We can argue if she is going in the right or wrong direction, but she has her own vision, she is offering it, and fearlessly moves Germany—and the whole of Europe—in the direction she thinks is right. Now that is leadership.

DM: But don’t you worry that what you have just described about Putin is coming to the West, and that Merkel is just an outlier?

MBK: Coming from a business background, I have a strong faith in people who managed to become leaders in business. At the end of the day, Donald Trump has a pretty long record of both successes and failures while being a top figure in business. This experience proves that he is inherently a leader. Of course, I don’t know if he will be able to leverage this skill in politics; business and politics are different things, after all. But I have no doubt that he has his own views, and that he will try to advance his views, for better or for worse for America. I’m sure he will try to be a leader, not merely a mirror that reflects public opinion. That is a trick that I think he only used during the campaign. We will soon see a new Trump—a better or a worse one, I don’t know. But definitely a new one.

KO: The column in La Stampa that I mentioned earlier is titled “It’s time to trust Russia: A common front against terror.” Do you think it’s time the West trusts Russia?

MBK: First of all, let’s define whether we are talking about trusting Russia or trusting the Kremlin. “Russia,” as Pyotr Stolypin once charmingly observed, “doesn’t change.” Russia, in the medium term, will be the same as it is now. If we are talking about Putin, well, we have an obvious problem there. Let’s compare him to the President of the United States. When a U.S. President signs an international treaty, it is going to go through congressional approval, and it will have protection in the courts. And there is an independent media that closely monitors everything the President does. In Russia, none of these institutions, acting as checks and balances against Putin, exist. He may promise one thing today, and do entirely another thing tomorrow. In politics, as in business, one doesn’t try to estimate a person’s desire, but rather what he or she is capable of doing. When a U.S. President promises something that has the weight of a law adopted by Congress and upheld by the Supreme Court, it represents a certain kind of guarantee. If Russia’s President promises something, we know this is no guarantee at all, because no broader system underwrites his decision. That’s why, when asked whether the West should deal with Putin, I say it absolutely should. This is a reality we cannot escape. But should the West build strategic long-term relations? No, it should not. The interactions should be ad hoc only—one step, another step, another step. But any attempt to look too far into the future when dealing with Putin only leads to self-deception.

KO: So in the immediate term, in what areas might the West cooperate with Putin?

MBK: In every area. For instance, in fighting terrorism, there are two approaches. One is to strategically join forces against ISIS, to sign international treaties to that effect. This is of course all nonsense. The only way Putin can be worked with is by saying, “Today you bomb here, and we won’t, and tomorrow we bomb there, and you don’t.” These are called working agreements.

KO: Do you think sanctions are effective instruments for dealing with Putin?

MBK: From the very beginning I was against sectoral sanctions, and I was criticized a lot for my stance. I said it was the wrong approach, because the economic impact on the Kremlin would not be that strong, while the political impact on the Kremlin’s opponents—and on yourselves—will be quite significant. The sanctions will be seen as being against Russia, not against the Kremlin. By implementing sanctions, you will be strengthening the bond between the Kremlin and Russian society, which is the most important thing for the Kremlin, because without such unity the Kremlin knows it is weak.

And to my deep disappointment, we are now facing another problem with these sectoral sanctions: they have become a political burden for the West. It was obvious they could not be kept up indefinitely. The Kremlin will now present any lifting of sanctions as a victory, which will represent another political blow against the West.

Personal sanctions are another matter, although I don’t support these either. But not because I consider that these people don’t deserve these sanctions—of course they deserve them. It’s just that I’m not a citizen of any of the countries that have imposed these sanctions, and I don’t think I have the right to ask foreign governments to punish citizens of my own country. We Russians should punish these people ourselves. But of course, if the West doesn’t want to invite these people within its borders, or if it is unwilling to keep these people’s money because it judges it to be stolen, well I can certainly understand that. It’s a reasonable, justifiable position.

KO: When you say sectoral sanctions, do you mean bans on long-term financing for Russian banks?

MBK: Yes, that’s absolutely right.

KO: But look, [Putin’s ally Andrey] Kostin [the CEO of the sanctioned VTB bank] came to DC asking for money.

MBK: He did, true. But so what? The governments of countries with an aggregate population in excess of 700 million met and came to a decision—so that Mr. Kostin would come begging for money? You have to agree, that’s laughable.

KO: But it turns out that the Kremlin doesn’t even have the money for someone as insignificant as Kostin and his bank…

MBK: Look, it’s ridiculous. You take a swing at a ruble but end up punching a kopek [a Russian saying, perhaps most analogous to “a swing and a miss” in English – Ed.]. And what we got on the flip side is that the Kremlin gets to trumpet these sanctions as anti-Russian. When the sanctions were being imposed, I said, “Guys, at least don’t call them sanctions against Russia, call them sanctions against the Kremlin.” But they didn’t even do that! And as a result, we have political unity between the Kremlin and Russian society. And in terms of financial deficits, compare the scale of these sanctions—around $30 billion of lost financing—with the losses from the drop in oil prices. It’s a tenfold difference. You can’t compare the two.

DM: Right, and the kinds of oil prices that brought prosperity to Russia in the 2000s are by now a distant memory, and are unlikely to come back any time soon. You have a background in energy and oil. How would you rebalance Russia’s economy to put the country on a path to sustainable long-term development?

MBK: First of all, you have to understand that the money Russia got from the super-high oil prices was in fact spent senselessly. Not even stolen, but spent senselessly.

KO: As Alexey Navalny once famously said, “For every stolen ruble in Russia, five are pissed away.”

MBK: No doubt. All that money in no way benefitted Russia. Anyway, I always cite a simple statistic: What portion of Russia’s GDP do oil, oil products, and gas account for? 10 percent. And what percentage is retail trade? Around 40 percent. What portion of the consolidated budget comes from incomes from the sale of oil and gas? 23 percent, the greater part of which does not depend on world oil prices, as it falls under domestic consumption. Therefore, when we’re talking about the direction of Russia’s development, it is obvious that oil and gas have nothing to do with it.

The country’s development needs to be based from the outset on the development of infrastructure and the housing and public utilities sector. These are the most important things. Later on, we should increase production in areas where we are competitive. And I think for us this might be small-batch manufacturing. We cannot overtake countries in assembly-line manufacturing; our mentality isn’t suited to this. As for the idea that we will become leaders in science and technology, well America is already the leader here, and it would take us many long decades to catch up. All that’s left is small-batch manufacturing—or a “new cottage industry,” as [Soviet dissident Vladimir] Bukovsky called it when he and I discussed it.

Consider that a man’s entire outfit might cost 100 nominal units, while some accessory might end up costing as much as 500. Nowadays, almost anyone can afford to spend money on things that signal their particular individuality, and demand for such things will only increase. Such manufacturing is very suitable to the Russian mentality, for what we are able to do. When we say that this is our way, we are not in the least bit saying that 100 percent of the population is going to be employed like this. No, we are talking about emphasis. Only around 15 percent of society would end up thusly employed. The rest, as anywhere else in the world, would build highways, cultivate the land, or work in construction.

KO: Turning back to sanctions—and to be more precise, the reasons they were imposed in the first place—how do you see the Donbas conflict being resolved? Can it happen with Putin in power?

MBK: As I see it, the task that Putin set for himself when he started the conflict in Donbas was to ensure that he had veto power over the foreign policy activity of Ukraine’s government. And he can achieve this goal either today by there being an open border between the two countries, which makes all of Ukraine a grey zone and thus limits its government’s ability to have a foreign policy; or he can achieve his goal through the eventual fulfillment of the Minsk agreements, which will grant the Kremlin-financed Donetsk and Luhansk a constitutionally guaranteed right of veto. This is Putin’s only goal. Therefore, if he succeeds, the acute, armed phase of the conflict will stop. Of course, I can’t say whether Ukrainian society will agree to these terms or not.

KO: And if they don’t, the conflict will not be resolved while Putin is in power?

MBK: Well, if the Ukrainian people don’t agree, then they will either have to regain control over these territories or to come to terms with Putin’s goals. There is no third option.

DM: And given current political realities, it will be more and more difficult for Europe and the West to fully support Ukraine.

MBK: Yes. I think that Western support going forward will be minimal. That fact will force the Ukrainian people to decide what they are prepared to do—and what they aren’t.

DM: You said above that Putin’s Kremlin needs a foreign enemy. But if the West backs away from supporting Ukraine, and Trump makes an effort to make nice with Russia, how do you think Putin will react?

MBK: The existence of a foreign enemy is a far more important thing for Putin than any benefits he might receive from cooperation with said enemy. And I believe that in the coming year, we will find ourselves in a situation in which the role of a foreign enemy will be restored. I have no doubt that they will manage to do this.

KO: On Crimea: some members of Open Russia, including people who are elected to its board, have some quixotic views on the question of Crimea’s annexation. One person in particular had tweeted that Crimea belonged to Russia even before its annexation, just when the Maidan kicked off. You have your own opinions on this matter as well. And insofar as Open Russia is pursuing democracy in Russia, in your opinion, what should a democratically elected president of Russia do with regard to Crimea?

MBK: I have been asked this question many times by my opponents. OK, let’s pretend that it’s not me who is the head of this virtual democratic government of Russia, but that you are. What would you do in this situation? And don’t tell me that Russian public opinion on Crimea has somehow been misrepresented by fraudulent polls. We checked with our own pollsters, their results are not that different. Russian public opinion is what it is.

KO: Well, that’s the thing. You usually point to public opinion when answering this question, and say that “only a dictator could abolish the decisions on Crimea.” And I agree with you that today most Russians want Crimea to be part of Russia. But what about in 2011 or 2012? Had anyone thought that Crimea was a part of Russia four or five years ago? No, there are no a public opinion polls suggesting anything like that. And we know that current public opinion was shaped by state-backed propaganda. So the question is: is it right for a liberal government to rely on the public opinion shaped by the concerted propaganda efforts of an illegal, illiberal state?

MBK: I agree that we can’t consider public opinion as legitimately acquired. But today it is what it is. What should we do in this situation?

DM: But you yourself earlier talked about the importance leadership, didn’t you? Isn’t this just such a situation?

MBK: And so we have arrived at the conclusion that today one needs to come to society and convince it of what needs to be done. And in my expert opinion, as a potential leader, I would be able to persuade people of the necessity of finding a compromise with Ukraine. But I will not be able to persuade society, as some people propose, to give Crimea back and pay a war indemnity. If you think that somebody can do that, let him or her become a leader.

KO: Why not give it a try? Because one’s political career would be at stake?

MBK: But that’s not the task at hand. One cannot head a state if he or she approaches society with proposals that society doesn’t accept. I’m saying that I’m ready to tell the people, “Guys, don’t vote for me, vote for the people whom I support, and we’ll find a compromise on this issue.” I know I can persuade people of this, and I think that a person taking such a position can actually win elections. You maintain that a person exists who can appeal to society by proposing to give Crimea back and pay an indemnity to Ukraine, and that the people would elect such person. Well then, fine, let this person win elections. But I don’t think it’s possible.

KO: What kind of compromise would you propose?

MBK: This is a very complicated issue with lots of variables. I think one such compromise could be granting limited autonomy to Crimea. Open Russia endorses a program for devolving more power to the local level. This should happen all across Russia, and in Crimea it could be done sooner than anywhere else. Once Crimea becomes an autonomous territory with the local government getting as much power as is possible, an agreement with Ukraine granting Crimea Hong-Kong-like status might be possible. Or some other model could be used. But I’m not prepared right now to sketch out a full-blown model, because it has to be the result of a bilateral approach. It should be a model acceptable to both Russians and Ukrainians. And when some experts say that the Ukrainian people wouldn’t accept anything but the full and unconditional return of Crimea, well that’s sheer and utter nonsense. I have a lot of Ukrainian acquaintances, and I assure you, that country is not filled with hard-liners. There are people who understand reality and who are prepared to accept this reality, without abandoning their interests. I’m convinced that the two peoples, Ukrainians and Russians, can find a workable compromise—that they can succeed where radicals from both sides have failed.

KO: Open Russia states it won’t fight Putin’s regime directly because the regime will destroy itself. What signs do you see of it destroying itself today?

MBK: You know, when they arrest a minister for a bribe, that’s still all right, even if it looks like he didn’t take a bribe, as it turns out. But when—even if it’s only а rumor—it turns out that dozens of federal officials were in essence getting a second salary from an oil company, well then this already clearly speaks to there being something not right with the mode of operation.  And if we’re talking about more objective indicators—well, the standard of living in Russia has been falling for more than two years already. In my meetings here in the United States, colleagues have cited a number of economists who claim that Putin has been successful in meeting the economic challenges of the country. I replied, “Listen, had living standards dropped by 20 percent in the United States, would anyone call this a success? Or would it be called a financial catastrophe?”

KO: What are the strengths and weaknesses of Putin’s regime?

MBK: One strength is that the regime can effectively mobilize resources for resolving one or two problems. Another strength is the state’s ability to use propaganda to successfully concentrate resources. The weakness is that all the talk about a “power vertical” in Russia is nothing more than a myth. The state is not being governed as a whole. Institutions have been completely destroyed, and as a result, Russia is being governed by a group—a fractious group—of siloviki and regional barons. A consolidated political and legal system doesn’t exist in Russia. This leads to the kind of growth we have seen. It’s impossible to set up a modern manufacturing base, because complicated technological chains of production cannot be lined up in such a system—a system without a coherent political and legislative field. It’s impossible to run small- or medium-sized businesses because businessmen have no access to nearby mechanisms for resolving conflicts. You either have protection (krisha) in Moscow, or at the regional level, or you cannot run your business. But to be able to pay for a krisha in Moscow, your business has to be sufficiently large, because for a small business, affording protection is not realistic. Or it forces one to try to be inconspicuous—to run a small business without much profit—which undermines the very spirit of entrepreneurship. This is a key weakness of Putin’s regime. The fact that the level of education and the quality of scientific schools is systemically declining in the country today, the fact that the manufacture of technological products is declining in the country today—this is not a fluke, this is intrinsic to this type of regime. There is no vertical of power; the country is for all intents and purposes not being governed.

DM: What are the strengths and weaknesses of the Russian opposition?

MBK: The Russian opposition is weak. Unfortunately, we were unable to create enough opportunities to reach out to broad strata of society. We have a quite narrow group of people we can work with. Nevertheless, we must keep working with this narrow group of people, because when the regime breaks down—like in a supersaturated solution, crystallization will occur very rapidly. We must preserve this seeding agent.

KO: When I think about the future of Russia, I realize that the country might have become a hostage of its own territory and of its own history. On the one hand, I think that given such a huge territory, Russia cannot be a unitary state and a democratic regime at the same time. Regardless of what is written in the Russian Constitution, Russia is not even close to being a federation. A true federation with such a huge territory cannot be created nowadays. It can only exist in an established country, with strong traditions and institutions, such as the United States. What do you see as the ideal system for the Russian state?

MBK: I’d say that Russia is neither a unitary state, nor a federation. In principle, I support a parliamentary model for governing the country. But I don’t think we can achieve it in one go, because the Russian people are strongly attuned to leadership, and they won’t easily give up nation-wide elections of a President. And a President elected by the whole country is going to be a strong political figure, no matter what it says in the Constitution. Thus, at the first stage we will have to transition from a presidential to parliamentary-presidential republic.

As for how the state should be structured, it should be federation, a real one. But that said, I am a supporter of strong local self-administration—the model Europe has given us, basically. Because for the gigantic Russian territories, even an oblast, or a krai, is too large a unit. The kind of power that works well is the kind that’s accessible to a person within a day’s travel time. Taking current Russian realities into account, this means local government should be no more than 40-70 miles away. That is to say, we need to strengthen local administration. I’m convinced that giving more power to local authorities would explosively boost small business and radically change living standards. On the whole, this is a federal model.

DM: What is Open Russia’s strategy for the next presidential elections in Russia?

MBK: If there are no dramatic changes, we will stick to the decision we made earlier. If Alexey Navalny is allowed to participate, we will support him. If he is not allowed, but another favorable democratic candidate is permitted to run, we will support him or her. If they don’t allow anyone, then in that case we’re going to look for another model of participation in the elections. But regardless, even if these elections aren’t actually elections, but some kind of political theater, we are still obligated to participate in them, because it is an opportunity to appeal to people and to show them an alternative—to show that they do have an opportunity to demonstrate their attitude towards those in power. There are several alternatives, including calling on people to write in an unregistered candidate.

KO: If you were to safely return to Russia, how would you see your political future?

MBK: As I have said before, I have no intention to run for some high government office. I think that the role I could play would be as part of a transition period—we calculate that it would take up to two years to organize the first truly democratic elections after the current regime collapses. It would be a period of implementing constitutional reforms and anti-crisis measures. At such a time, I would be willing to participate in the work of the kind of intermediate body that would necessarily have to be created. In what role? In whatever role is needed. Afterwards, I’d like to do other things I’m interested in.