The millionaire, the murder and the magazine having a little bad fortune

In almost any other European city, the decision to run an article on a well-known businesswoman would be uncontroversial. But not in Moscow. Andrew Osborn reports

More than 100,000 glossy magazines consigned to the shredder, an editor who says he had no other choice but to resign "in disgust", and one of the publishing world's most famous names scrambling to protect its reputation. And all to appease Russia's richest woman.

As media scandals go, the latest brouhaha to hit the Russian edition of Forbes, the capitalist's bible, has it all and if the world needed a reminder that the issue of press freedom in Russia remains a minefield they just got one. Forbes Russia is no stranger to trouble - its first editor, US-born Paul Klebnikov, was shot dead in Moscow in 2004 after publishing what was Russia's first and most authoritative rich list.

Nobody has been convicted of his murder, despite a lengthy trial and the real reason why he was killed remains a mystery. But now the Russian arm of Forbes finds itself in a very different kind of trouble; it is fighting to protect its journalistic credibility against allegations that it has given in to a peculiarly Russian kind of censorship. The magazine has become embroiled in a damaging row with billionaire construction magnate Elena Baturina, Russia's wealthiest woman, and a lady who also happens to be the wife of Moscow's powerful and controversial mayor Yuri Luzhkov.

Baturina, 43, is famously litigious and, like many of Russia's super-rich, doesn't appreciate having details of her fabulous wealth pored over in public. What she famously dislikes even more are any suggestions that she has built her multi-billion pound property empire on the patronage of her husband, mayor of Moscow for the past 14 years.

Worth an estimated $2.4bn and rated as Russia's 29th wealthiest individual, the blond oligarchess has acquired and developed some of the Russian capital's best real-estate sites at a time when her husband has overseen a building boom that has given Moscow its most radical makeover since Stalin took a wrecking ball to it in the 1930s.

Whether her incredible success is linked to the fact that her husband is the man who decides which construction companies get to develop the city's most lucrative patches of land or not has long been a topic of speculation in Muscovite social circles.However, Baturina, who started off her business making plastic chairs and buckets in 1991, has always insisted that her success owes nothing to her husband, a man who harbours presidential ambitions.

She is well known for her readiness to defend that stance. So when Forbes Russia decided to do a cover story on her, they must have known they would have to tread carefully. They put together a magazine cover showing a smiling, pinstripe-suited Baturina with the caption: "I have been guaranteed protection," an apparent reference to the fact that her business interests will be safe once her husband, her assumed protector, stands down as mayor at the end of next year.

Inside, over seven pages, the magazine relates how she cleverly restructured Inteco, her monolithic construction firm, and how her investment portfolio would be unaffected when her husband, Mr Luzhkov, stands down. It told readers how she had made her fortune, published details of her assets, and speculated how much money she stands to make in rental income from property she owns in Moscow and elsewhere.

But as far as Baturina was concerned, Forbes went too far, way too far. It wasn't long before Axel Springer, the German company that publishes the magazine under licence in Russia, received a visit from one of her senior executives who had somehow seen an advance copy. In his hand was an injunction seeking to seize and freeze all copies of the offending periodical and to prevent any publication of their contents on the internet.

Baturina took particular exception to the quote on the front cover, which she said had been misleadingly truncated and taken out of context. She apparently told Forbes that "like any investor, protection of my rights is guaranteed," a phrase that she said had an entirely different ring about it and did not suggest she was getting special treatment because of her husband.

Her lawyers also contended that the article itself was "tendentious" and written in a way that invited readers to make certain "incorrect" assumptions.

In an attempt to head off embarrassing legal action, Forbes' publishers, Axel Springer, did something which they have obviously since had cause to regret; they rolled over. The publishing house didn't just amend the front cover to appease Mrs Baturina but decided to pulp the entire December print run, due to be published on Thursday.

In a bizarre statement, the publishers explained that "the principles of journalistic ethics" had not been observed in its own cover story, a statement that read like a self-inflicted wound if there ever was one.

The magazine's editor, Maksim Kashulinsky, was less inclined to indulge in self-flagellation. He tendered his resignation and embarked upon a robust public-relations offensive, arguing that his publishers had "sold out" and caved into pressure from one of Russia's most powerful oligarchs.

The story hit the front pages of the national newspapers and sparked a firestorm of indignation and alarm from liberal commentators. Aleksei Venediktov, editor-in-chief of the liberal Ekho Moskvy radio station, said Forbes could have simply changed the cover page rather than destroy the entire magazine. He added that, while the incident might tarnish the profile of the mayor's wife outside Russia, "inside Russia, an incident like this strengthens her reputation".

Mr Kashulinsky, meanwhile, turned on his publishers with unusual venom. "I didn't understand what their [Baturina's lawyers] claims were, they simply didn't want the story to come out," he told the daily Kommersant. "If a Western publishing house has this kind of attitude to business in Russia I think it's very sad. Our publishers did not want to pull the magazine because there was an erroneous quote but for some other reason."

The American management of Forbes has backed Mr Kashulinsky. Aware that the reputation of the global Forbes brand was on the line, they issued an extraordinary statement demanding that the magazine be put out in its original form forthwith. After considerable soul-searching - and faced with the risk of losing its licence to publish the prestigious journal - Axel Springer has now performed a spectacular U-turn. It said it would publish the offending article after all, albeit with an amended front cover.

In a statement, it stressed that the work of its journalists was "based on the principles of free speech." But for many, the damage to Axel Springer's reputation and perhaps Forbes' had already been done. Senior executives at Axel Springer may now be fired for their role in the debacle and the incident has left a bitter taste in many mouths raising issues about the freedom of the press in Russia at a time when the Kremlin is consolidating its already vice-like control over the media.

Axel Springer spokeswoman Edda Fels suggested it was best not to rush to judgment. "Emotions ran high - freedom of press is a huge issue in Russia, understandably. We should wait ... until everybody has calmed down," she said. But Igor Yakovenko, general secretary of the Russian Union of Journalists, said Axel Springer had almost succumbed to censorship because it did not fancy the prospect of paying out damages if it lost a court case.

He also noted that Baturina's heavy-handed attempts to influence Forbes' editorial position had ultimately backfired as the story had already received far more attention because of the ensuing scandal. "Let's hope that others aren't so clumsy in their efforts to obstruct the dissemination of information," he said.

Forbes has had a rocky ride since it launched in Russia on the anniversary of Vladimir Lenin's birthday in 2004. Its first editor, Paul Klebnikov, predicted the magazine would be an observer of an extraordinary transformation in Russian society.

"The fact that the Russian market is ready for the appearance of such a publication is a sign that Russian business has begun a new, more civilised stage in its development," he wrote in his editorial address back in April 2004.

"Today Russia is standing on the threshold of a new era ... we will become the witnesses of a great renaissance in Russian society." He promised readers that the magazine would be steadfastly independent.

Three months later, Mr Klebnikov was dead, gunned down as he walked home from his Moscow office. Two Chechens were tried and acquitted for his murder, a crime they had apparently committed to punish him for writing a critical book about a Chechen warlord. They are now to be retried.

It is undeniable that the Russian economy has boomed since 2004 and that its businessmen have become more influential than ever on the global stage,particularly where oil and gas are concerned. However, the new "civilised" dawn envisaged by Paul Klebnikov in his editorial has yet to emerge.

A worrying resurgence in contract killings and an increasingly tight-lipped state-owned media have seen to that. This latest episode, an incident that appears to have been a near miss with serious censorship, is another disturbing omen.