IT WAS ALL going so well. Russia's economic development and trade ministry had upgraded the end-of-year GDP growth forecast twice to 5.7% and economists were even more ebullient. The stock market was flying, having reached analysts' end-of-year forecast by June. And Russia had seen the first really big foreign investments since reforms started in 1991.
Then, on July 2, Russian police arrested Platon Lebedev, the man credited with rescuing Russia's biggest oil company, Yukos, from bankruptcy in the wake of the 1998 crisis, and a nasty power struggle broke out between the liberal-market-oriented Kremlin factions and the unreformed old guard. The stock market immediately fell heavily, capital flight shot up again and the threat of renationalization appeared to hang over all of Russia's leading companies.
Russia has put in a sparkling economic performance over the past two years, but the war between the two opposing factions for the long-term control of Russia's development has been an unwelcome reminder that politically nothing much has changed. And while president Vladimir Putin can take the credit for the strong economic results, the blame for the political imbroglio also rests with him.
What had started as a routine dig at Yukos CEO Mikhail Khodorkovsky, Russia's richest man, from his enemies in the Kremlin quickly spun out of control.