The International Herald Tribune reports on the disappearance of the concept of private property in today's Russia, just as in Soviet times, as puppetmaster Putin pulls the strings:

Last January, Mikhail Prokhorov, a 42-year-old Russian mining entrepreneur and a multibillionaire, celebrated the holidays in singular style: with dozens of business associates and an entourage of young Russian women at the exclusive ski resort of Courchevel in the French Alps. Prokhorov - often called Russia's most eligible bachelor - usually unwound at such blowout parties, which he once told an interviewer embody his philosophy of life. In Courchevel, the French police detained him for four days on suspicion of making prostitutes available to his guests. The police released Prokhorov without filing any charges, but they identified him as a witness in their prostitution investigation.

In one of the more bizarre cases of an apparently forced sale of Russian assets, Prokhorov's festivities in Courchevel led to his agreement to sell his 26 percent stake in Norilsk Nickel, the world's largest nickel producer. The buyer was Vladimir Potanin, his longtime business partner and a favorite of the Kremlin. Prokhorov and Potanin bought a controlling stake in Norilsk, named for the Siberian city where it is located, for a scant $250 million during the hotly contested privatization of state-owned companies in the mid-1990s.

Today, Norilsk produces one-fifth of the world's nickel, a key alloy in stainless steel, and has a market capitalization of $31.9 billion; its profits doubled last year, to $6 billion, buoyed by high demand for steel in China. Awash in cash, Norilsk in late June closed a deal to buy the Canadian mining company LionOre for $6.4 billion and already owns a controlling interest in Clearwater Mining in Montana.

In an interview on state television, Potanin said he ended his partnership with Prokhorov, who Forbes magazine estimates has a net worth of $13.5 billion, because of the embarrassing arrest. They have yet to complete the deal, but the partners said they would unwind their businesses before the end of the year, leaving Potanin in control of Norilsk. And who, ask some analysts in Moscow, controls Potanin?

"In Russia today, no serious deal can be made without approval from the Kremlin," said Irina Yasina, a researcher at the Institute for the Economy in Transition, a research group led by a former prime minister, Yegor Gaidar. "A person like Potanin, without the agreement of the Kremlin, can do nothing."

Under President Vladimir Putin, the Russian government is establishing vast state-owned holding companies in automobile and aircraft manufacturing, shipbuilding, nuclear power, diamonds, titanium and other industries. His economic model is sometimes compared with the state-owned "national champion" industries in France under Charles de Gaulle in the 1950s. The policy of forcing owners of strategic assets to sell their holdings has also been compared to recent nationalizations in Venezuela and other Latin American nations. Rather than expropriating assets outright, the government of Putin has exploited minor legal infractions at the target companies to force sales. Either government-controlled companies, or companies run by men seen as loyal to the Kremlin, are the beneficiaries.

In 2003, for example, prosecutors went after Mikhail Khodorkovsky, chairman of Yukos Oil, then Russia's largest private company, on accusations of tax evasion. Khodorkovsky was sent to a Siberian prison, and Yukos went bankrupt. The state company Rosneft later acquired most of the Yukos assets. Last fall, it was environmental infractions in pipeline construction that forced Royal Dutch Shell and Japanese partners to sell a controlling stake in their $22 billion Sakhalin II oil and gas development to Gazprom, the state gas monopoly.

Then, this June, BP's local joint venture, TNK-BP, sold its share of a huge gas development after regulators threatened to revoke the license because the field was developed too slowly, which was a technical violation of the terms of TNK-BP's license. Gazprom, again, was the beneficiary.

Coincidentally, Prokhorov and Potanin own a minority stake in that same BP gas field. Their 26 percent stake was not touched, perhaps because of Potanin's close ties to Putin. But in the case of Norilsk, Prokhorov's arrest, analysts say, seems to have been a fortuitous accident that gave the Kremlin cover for exerting more control over this strategic metals company. Prokhorov and Potanin both declined to be interviewed. But the end of their partnership is yet another milestone in how the Kremlin and a class of ambitious, enormously wealthy Russian businessmen known as oligarchs do business together.

"Property rights are very conditional in Russia, to this day," said Olga Kryshtanovskaya, a sociologist at the Institute of Sociology of the Russian Academy of Sciences who studies Russia's business and political elite. The government lets big industrialists "exist only under conditions it considers acceptable," she said, adding: "When the Kremlin considers a capitalist such as Prokhorov no longer acceptable, he is deprived of his property, by one means or another. Private business exists only by the grace of the state."

Both Prokhorov and his Norilsk co-owner, Potanin, grew up in well-connected Moscow families. The Prokhorovs were academics - his father directed a laboratory, his mother was dean of a university chemistry faculty - and as a young man he followed their footsteps into one of the Soviet Union's most prestigious colleges, the Moscow Financial Institute. He graduated in 1989 with a degree in finance. Characteristically for the Russian oligarchs, Prokhorov became wealthy in his 20s, after passing through a phase of selling jeans in Moscow in the late 1980s. In 1993, he parlayed jobs at state banks into the chairmanship of the board, at 28, of a new private bank, Unexim Bank - which went on to buy Norilsk Nickel three years later during the government of Boris Yeltsin. It was at Unexim Bank that Prokhorov met Potanin, who was one of the bank's directors. Potanin, a one-time deputy prime minister and the son of a former Soviet foreign trade official, has a reputation as an upstanding family man and a sponsor of the Russian Olympic team. He handled the pair's relations with the Kremlin - and was often vilified by critics who said he used his political connections to buy Norilsk for a fraction of the value.

However fortuitous their rise as industrial titans, the two men did convert an inefficient Soviet behemoth into a modern corporation. After gaining control of Norilsk Nickel, they spun off noncore assets and streamlined one of the mining industry's most complex logistics operations. Analysts credit Prokhorov with spinning off the company's gold assets to form Polyus Gold, now the largest Russian gold producer. It trades on the London Stock Exchange and has a market capitalization of about $8.5 billion. "Norilsk management has actually done quite a good job," says Michael Kavanagh, a senior metals analyst at UralSib in Moscow. Norilsk stock routinely outperforms the world's largest mining companies: BHP Billiton, Rio Tinto and Anglo American. Prokhorov took a hands-on role in Norilsk. At the copper factory, one of three smelters in town, the work force was reduced to about 2,250 by moving about 1,950 employees into contract jobs, a move that angered many people in the city. Prokhorov also invested $100 million in pollution controls at the copper factory.

Back in Moscow, Potanin proved his loyalty to Putin. In 2004, at a crucial juncture in modern Russian political history, Potanin aided the Kremlin's campaign to restrict freedom of speech by firing the editor of Izvestia, a newspaper that he controlled, after it published accurate accounts of the Beslan school hostage crisis. Potanin subsequently sold Izvestia to Gazprom, the state gas company. Last summer, government officials approached Prokhorov and Potanin to discuss a possible sale of Norilsk to the government, said a metals industry adviser who has close ties to the government and requested anonymity because he had not been authorized to discuss the partners' business with the media.

Prokhorov, a free-market enthusiast who once said that the Norilsk factory had no obligation to the city around it other than to pay taxes, objected to a sale, according to the adviser. Potanin favored opening talks. "Naturally, if they gave up, he would be the first to do so," the industry adviser, who knows both men, said. "He is closer to the authorities." In Moscow, much speculation has swirled over whether the Courchevel police raid that precipitated Prokhorov's sale to his partner was a setup, somehow orchestrated to push Prokhorov out of Norilsk. LR: This is exactly how Putin got rid of the pesky prosecutory Yuri Skuratov. The French police said the detentions were linked to a wider, continuing investigation into Russian prostitution at ski resorts in the Alps that had begun the previous year. During the four days of Prokhorov's incarceration in France, stock in Norilsk Nickel and Polyus Gold dropped sharply amid the uncertainty over his fate; Norilsk's market capitalization dropped by $2.3 billion and Polyus Gold's by $800 million.

In that stock slide, Prokhorov personally lost about $820 million on paper, based on his publicly disclosed holdings in the companies, though the share prices have since rebounded. A Norilsk spokesman called the arrest a "regrettable misunderstanding." Vedemosti, a Russian business newspaper, reported that Potanin might pay Prokhorov, in part, in shares in Polyus Gold. Prokhorov said recently at a Moscow news conference that he now planned to start an investment fund focused on electricity and alternative energy, particularly hydrogen fuel cells. He works out of a Moscow office; aides declined to say whether he might emigrate, as other out-of-favor oligarchs have done. Potanin, in an interview on state television in February, said the partners had discussed the sale before the Courchevel event, but that "the scandalous situation accelerated the announcement."

Neither commented publicly about the reputed disagreement over a sale to the government. Prokhorov, however, said in an interview with the newspaper Kommersant that there was only one buyer for a majority stake in Norilsk Nickel - the government - and that this hobbled the company's ability to expand internationally. As majority owners, he said, he and Potanin were unable to use their shares as currency in the mergers and acquisitions sweeping the global metals business because the government would be unlikely to approve any transfer of a large stake to foreigners.