10/21/2011 06:06 pm ET | Updated Dec 21, 2011

A Sobering Look Inside Putin's Russia

PRAGUE -- Vaclav Havel was stooped and frail last week when he opened his annual Forum 2000 at the glittering Zofin palace beneath Prague Castle. While the voice of the iconic former Czech president is weakened by illness and the burden of 75 years, through these yearly events Havel still speaks truth to power.

Several speakers, most prominently opposition politicians Gregory Yavlinsky and Boris Nemtsov, painted a grim picture of a corrupted Russia groaning under the weight of a tyranny only slightly less cruel than in Soviet times. The 59-year old Yavlinski, whose Yabloko party will participate in December's parliamentary elections, said Russia has neither rule of law nor property rights. "The judiciary," he said, "is controlled by the ruling elite and money."

Nemtsov, a leader of the People's Freedom Party, said that by orchestrating a return to the presidency, "Putin has decided to be president for life." He accused the Russian leader "of keeping totalitarianism to protect corruption." Putin's friends, he continued are the "crony capitalists" who have plundered state assets and safely deposited that ill-gotten wealth outside of Russia. Nemtsov, a deputy prime minister in 1997-1998, has been arrested three times this year. The Kremlin refuses to register his party, which is thus unable to contest the Duma elections.

Both opposition politicians say the outcomes of the Duma and presidential election to be held in March are already known. "Everybody knows who will win," said Nemtsov, who called Putin's September decision to return to the presidency after four years as prime minister, "cynical, hypocritical, and humiliating."

William Browder, the London-based chief of Hermitage Capital, who until being expelled in 2005 was Russia's biggest foreign investor, said corruption in Russia "is many times worse than anywhere else." Transparency International places Russia near the bottom of its corruption index, number 154 out of 178 countries surveyed.

Browder is leading an international campaign to achieve justice for the death in custody of 37-year-old Sergei Magnitsky, a lawyer representing Hermitage who had uncovered evidence of how police, judges and bankers colluded with the elite to steal $230 million of taxes Hermitage paid to the Russian government. Magnitsky died in November 2009 after being held in a Moscow prison for 11 months without trial.

"Terrible things are going on in Russia," said Browder who wants western nations to use sanctions against corrupt Russians in the same way they did against the apartheid government in South Africa.

Yavlinsky, speaking on the same panel as Browder, said "the law protects no one in Russia." Agreeing that Magnitzy was killed because he knew too much, Yavlinsky cited statistics that over 4,000 people have died in Russian jails in each of the past three years.

Nemtsov said aside from the absence of democratic institutions, Russia's biggest problems are corruption, a shrinking population and poverty. He said a survey undertaken by his party found that 40% of young people under the age of 25 want to leave Russia.

Bobo Lo, an independent London-based analyst and former Australian diplomat in Moscow, said that except for macro-economic stability "Russia is hopelessly mismanaged. "It is," he said, "a crack (cocaine) country that has shrunken to international insignificance." Russia, he continued, must modernize itself and its institutions to again be a major player on the world stage.

Lo dismissed suggestions that Russia could emulate China in achieving a vibrant economy while maintaining a monopoly on political power. "This idea," he said, "makes me laugh because Russia is unwilling to allow the kind of unfettered entrepreneurship that flourishes in China." Without modernization, Lo said Russia faces the prospect of long-term stagnation.

Nemtsov is not as pessimistic. He perceives a popular consensus in favor of modernization. But unlike Putin, Nemtsov argues that modernization can not occur without democratic structures and solid institutions.

Suprisingly, both Nemtsov and Yavlinsky are optimistic about Russia in the long term. People want to be free and part of Europe. Nemtsov foresees things getting better within five years. Yavlinski, whose party obtained a miniscule 1.6% vote in the 2007 Duma election, says real change is many years distant.

How should western nations interface with Putin's totalitarianism? "Just as they do with China," says Lo, "have no illusions in dealing with Russia." Adds Yavlinsky, "just tell the truth. We have become a more open country, particularly the media, so say openly to the Russians what you think." He cautions business people to be careful and faults western banks for doing business with Russians who are known to be corrupt. Yavlinsky credits oil wealth and the commodities boom for boosting living standards since Putin took over in 2000, and making the Russian leader popular with many Russians.