Expert View: The robber barons need a touch of Putin's iron fist

"We had to clean our teeth in champagne, the water was so rancid" ... "The chambermaid stole all my underwear - I nearly froze to death" ... The tales told by friends and colleagues ahead of a trip to Russia used to be just a little off-putting. One lady even confessed: "I ended up acting as a spy - helping refuseniks." The reality today proved very different. Russia seemed highly Westernised and prosperous, the food was excellent, and my hotel put the Copenhagen Sheraton, where I had just come from, to shame.

"We had to clean our teeth in champagne, the water was so rancid" ... "The chambermaid stole all my underwear - I nearly froze to death" ... The tales told by friends and colleagues ahead of a trip to Russia used to be just a little off-putting. One lady even confessed: "I ended up acting as a spy - helping refuseniks." The reality today proved very different. Russia seemed highly Westernised and prosperous, the food was excellent, and my hotel put the Copenhagen Sheraton, where I had just come from, to shame.

Then there was the murder.

At 10pm last Friday, Paul Klebnikov, an American of Russian descent, left his office at Forbes Russia magazine and was shot four times from a passing car. The rumour reported in The St Petersburg Times was that the bullets came from two different guns, making a Mafia hit seem obvious. As he lay dying on the pavement, another journalist came out and had time to ask Paul who he thought had done this. He had no idea.

Any financial journalist working in Russia today develops powerful enemies, and Klebnikov was no exception. Some were keen to suggest the murder was a terrorist outrage, Klebnikov having written a book on the Chechnyan separatist commander Nukhayev entitled Conversations with a Barbarian. But others felt it much more likely that one of Russia's new class of oligarchs was behind the murder. In compiling the recent Forbes Rich List, Klebnikov had shocked the world with his investigation of their fabulous wealth. Moscow was found to have more billionaires than New York. He had previously been sued by Boris Berezovsky, whom he had described as a "powerful gangland boss", after he appeared to link him to the murder of another journalist, Vladislav Listyev.

The authorities have moved quickly, "Russia is no oligarchy" being the line. For some, this is hard to swallow. Any business traveller to Russia notices the striking number of large black limos, and the obvious, conspicuous consumption of a gilded few. At dinner in the Senate Bar last week, I found French wines at up to £8,000 a bottle.

And 20 journalists have been murdered in the past decade.

An attempt to control these oligarchs is widely seen as the background to the power struggle between President Vladimir Putin and Mikhail Khodorkovsky for control of the oil giant Yukos. Mr Khodorkovsky was dramatically arrested on his private jet in Siberia by machine gun-toting secret police. On the same day that Mr Putin met 21 senior businessmen, the government announced it was levying a tax charge of £1.8bn against Yukos for 2001. Point taken?

Mr Putin has been the subject of much criticism in some circles for tightening the Kremlin's grip on power and for his reduction in the freedom of the media (Russia's leading satirical TV show was taken off the air last week). But at the same time, one can't help seeing the necessity for him to take action. True, the assault on Yukos has raised the risk premium on Russian assets. Some suggest it has also sparked the mini-banking crisis that is going on in Russia. While I was there, customers were queuing in their droves to withdraw deposits from the likes of Alfa Bank and Guta Bank.

But Russia is going through an extraordinary economic transition. With economic growth, already at close to 7 per cent, being fuelled by the boom in the oil price, the country is experiencing a sort of second industrial revolution. Parallels can be found in the history of the United States in the last decades of the 19th century. Extraordinary fortunes were accumulated by robber barons, who often kept private armies and had those that displeased them disposed of. In many instances, they also challenged the authority of the federal government. It was necessary to reassert that authority for the US to move to its next phase of development in the 20th century.

Is Russia today any different? It's come a long way since visitors brushed their teeth in cheap champagne. There are times when governments need to clip the wings of capitalism.

christopher.walker@tiscali.co.uk