Russian Roulette Western Companies Fight for Press Freedom in Moscow

German publishing house Axel Springer's disastrous December issue of its Russian business magazine Forbes offers a textbook lesson in the grim realities of the media business in Vladimir Putin's Russia. There, murder, intimidation and bribes have become a massive threat to serious journalism.

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When lawyers representing businesswoman Yelena Baturina issued a three-page declaration of war in the editorial offices of Forbes Russia last Thursday at 5:18 p.m., they put out the last flicker of hope that the unpleasant ordeal might end peacefully.

The lawyers at her conglomerate Inteko gave the magazine an ultimatum: Unless Forbes Russia disclosed all sources and the identities of all informants it had used in a cover story about their boss by Dec. 14, the company planned to file legal action. The lawsuit could potentially cost the publishing company millions.

For Axel Springer, the German media conglomerate which has published Russian versions of the American magazines Forbes and Newsweek under license for the past two years, the Baturina affair is the current climax of a highly symbolic test of strength. The two publications are viewed in Moscow as the pinnacle of serious journalism.

Indeed, many Russian reporters see the conflict between Forbes and Baturina as a barometer of their own futures. Is yet another bastion of independent journalism being reined in? Will two of the world's best-known publishing houses be brought to their knees by Russia's most powerful businesswoman?

Money and markets are at issue, but at the core of the affair is the freedom of the press in a country where many journalists have already paid with their lives for some of the stories they wrote.

The media scandal began at the end of November when Forbes, as it does every month, published an ad in its sister publication Newsweek featuring the cover image of its upcoming December issue. The cover brandished a photo of Baturina, Russia's only female billionaire, together with the quote: "I am guaranteed protection."

A meteoric rise

The headline hit a sore spot with the 43-year-old businesswoman, whose fairy tale rise from administrative assistant to Russia's richest woman is repeatedly linked to her husband, Moscow's powerful mayor, Yuri Luzhkov.

In 1991 Luzhkov, then 55 and Moscow's deputy mayor, married his former assistant Baturina, who was 27 years younger. In the same year, the young bride founded Inteko, a manufacturer of plastic buckets and disposable cutlery. A year later, then-President Boris Yeltsin made Luzhkov mayor of Moscow. Luzhkov's appointment marked the beginning of a veritable construction frenzy in the city of 11 million -- along with the newly minted power couple's unstoppable rise to the top.

The media first turned its attention to the city's first lady in 1998, when journalists began investigating Inteko for allegations of nepotism in the awarding of a contract for the 85,000 plastic seats that fill Moscow's new Luzhniki Stadium. But Baturina remained undeterred and went on a corporate buying spree, snapping up a construction company, a cement plant, estates in the countryside and a bank.

"She has a square head. She was born with the brain of a man," Luzhkov said, commenting on the successes of his wife, who is increasingly branching out beyond Russia's borders.

In late October, Baturina presented her plans for real estate projects in Munich worth $2.2 billion. A passionate art collector with a weakness for expensive vases, Baturina is planning office complexes, a hotel chain in Russia and a golf hotel in the Austrian ski resort of Kitzbühel. According to her spokesman, Gennady Terepkov, Inteko is currently investing up to $2 million dollars a day.

A bulldozer full of roses

As his wife spent the last 15 years accumulating a $2.4 billion fortune, Luzhkov kept busy capturing the hearts of Muscovites. A bald, short but powerfully built man, Luzhkov has worn many crowd-pleasing hats, from that of an intrepid swimmer braving the cold in the icy Moscow River to a poetry-spouting player of the balalaika. He even wore a swan outfit during the Russian version of Mardi Gras. His wife, who once had a bulldozer deliver a load of roses to her husband on his birthday, seems to be as enamored of him as the citizens of Moscow.

The two have organized their life like a game of tennis. While he seeks out fast points at the net, she runs the show from the base line.

But woe is to anyone who would dare to describe them as a doubles pair. They vehemently deny the constantly recurring rumors that Baturina is given preferential treatment in municipal construction decisions, including the allocation of land and awarding of contracts.

Baturina once even managed to extract an apology from a general public prosecutor. Ten years ago the small opposition paper Novaya Gazeta experienced the full force of her anger when it reported that Luzhkov had arranged for kickbacks to his wife's company in connection with a brewery construction project. Baturina forced the paper to run a counterstatement from her denying the allegations.

Rattled nerves in Germany and New York

But Baturina is unlikely to be satisfied with a counterstatement in the Forbes case. On Wednesday, Nov. 29, the day before the publication was scheduled to hit the newsstands, Regina von Flemming, the director of Axel Springer Russia (ASR), received a visit from Inteko Vice President Ilya Parynshkov, who had come to threaten the publication with a lawsuit.

Parynshkov argued that the quote on the magazine's cover, "I am guaranteed protection," was tendentious and could not be published as such. The full Baturina quote read: "As an investor, I am guaranteed protection of my rights." After reviewing the case from a legal standpoint, editor-in-chief Maksim Kashulinsky gave way and had a new cover printed with the correct quote.

But even that wasn't enough for Inteko, which was displeased over the general tone of the story, which describes the way Baturina has structured the company for the period following the end of her husband's term in office in 2007. The company's irritation over the article comes as no surprise. After all, the magazine quotes oligarch Alexander Lebedev, Luzhkov's main adversary in the 2003 mayoral election, describing the couple as a "government-family partnership." The magnate has since disclosed that he was the principal source for the piece.

Inteko's lawyers demanded that Forbes cancel the entire issue. The editorial sloppiness that had contributed to Baturina being quoted out of context made Springer executives in Berlin nervous, leading to speculations that the text of the story could also contain errors.

  • Part 1: Western Companies Fight for Press Freedom in Moscow
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