FOR President Putin, this is a rare mistake, destructive of Russia’s potential prosperity and, possibly, of his own political future.

It was no surprise that the Russian stock market plunged more than 14 per cent on opening yesterday, after the arrest of Mikhail Khodorkovsky, the head of the oil giant Yukos and Russia’s richest man. That brought a juddering halt to the year’s threefold rise, which has made Russia the darling of the fashionable “emerging markets” branch of finance.

That fall is a sensible — and overdue — response to the questions that hang over Russia, symbolised by the arrest but not caused by it. Has Putin been hijacked by hardliners, his old KGB colleagues, whom he brought into government? Is the climate for investment chillier than it has seemed?

At this point, the answer to both looks like “yes”.

It is not that Khodorkovsky has a lot of fans, in high or low places. In fact, that was part of his problem. Within the Kremlin, he had aligned himself with neither the hawkish “St Petersburg” faction, which includes many former KGB men, nor the more liberal camp created under President Yeltsin.

For ordinary Russians, particularly older and poorer ones, he was dubbed a thief, another oligarch who made his wealth from fast, shady privatisations.

Yet in liberal, commercial, Western-orientated circles, he had come to stand for something different: the hope that the Russian Government was making good on its promises of economic reform and that Russia was now a place where you could invest safely.

Yesterday, liberals, businessmen and investors were appalled. They fear that the arrest shows that the Kremlin is prepared to bend the law to its own advantage.

Putin takes the line that if the courts ordered Khodorkovsky’s arrest on charges of fraud and tax evasion, then there must be something to it. But it fits in with his strategy of undermining the oligarchs, driving Boris Berezovsky and Vladimir Gusinsky into exile. It is also, many suggest, provoked by Khodorkovsky’s financial support of struggling opposition parties ahead of the parliamentary elections on December 7. The Kremlin cannot have failed to notice Yukos-backed candidates on lists across the political spectrum. Although Putin himself is unlikely to face much of a challenge to his re-election in March, Khodorkovsky has been mentioned as a potential candidate in 2008.

Under Russian law, now that charges have been brought, nothing has to happen for 60 days — until a fortnight after the elections. But if this was Putin’s motive, it may prove counter-productive. Before the arrest, the opposition parties were not expected to have much impact; now they might, fuelled by anti-Kremlin outrage.

More seriously, the arrest — and the fall in the market itself — may check the appetite for investment. The rise of the market has been driven both by foreigners and by Russians’ repatriation of capital. The attractions were already looking overblown; the World Bank, in a shrewd analysis last month, said that the economy was vulnerable to a fall in the oil price.

Incited by Kremlin hawks, with their exaggerated fears of the threat posed by Khodorkovsky, Putin may have underestimated the impact on Russia’s image in the West and among investors. It may prove a move that truly shakes the pillars of his presidency.

Useful precedent

It is not proving a good month for the doctrine of no first strike in the use of nuclear weapons. The French daily newspaper Libération asked in an editorial yesterday whether France might be moving by increments towards a new policy of warning that it might use its weapons in pre-emptive strikes.

That follows a document from the Russian Defence Ministry, which said that it might rethink its nuclear strategy in response to Nato’s “offensive military doctrine”. Sergei Ivanov, the Defence Minister, had said that Russia did not rule out a pre-emptive strike if national interests demanded it.

In a sense, these shifts — at the moment in nuance — have been a long time in coming. France and Russia criticised the United States’s decision to move to an explicit strategy of pre-emption in the wake of the terrorist attacks of September 11, 2001. The formal shift from Washington was advocated by Donald Rumsfeld, the Defence Secretary, in January 2002 and presented as part of a new, post-Cold War defence strategy a year ago.

True, the new US position is consistent with Nato policy. But it could mark a shift from statements in 1995, on the renewal of the 1968 Nuclear Non-Proliferation Treaty. All five declared nuclear weapons states — the US, UK, France, China and Russia — said then that they would not use nuclear weapons first against nonnuclear states that were parties to the treaty, except if they or their allies were attacked by such a state in alliance with a nuclear weapons state.

Among other nuclear weapons states, India has a “no first use” policy. Israel does not. Pakistan says that its position is in line with Nato and the US — not formally ruling out first use — but it has strongly advocated that nuclear weapons should not be deployed in a state of readiness.

Lord Robertson of Port Elllen, the Nato Secretary-General, says that Ivanov has assured him that Moscow is not adopting a more aggressive stance. French defence officials talk about “evolution” of policy, not change. But it cannot come as a surprise that those wanting to tinker with their tone of national defence policy should find the US precedent of last year useful.

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