by Sergei Blagov
(IPS) MOSCOW --
was an arrest that shook Russia's money world.
More than $15 billion were wiped off the market after the head of the giant oil company YukosSibneft was taken into custody last weekend.
Mikhail Khodorkovsky, charged with fraud, embezzlement and tax evasion, is Russia's richest man, with a personal wealth estimated at $11 billion.
The market recovered a little Tuesday and Wednesday, in part because an appeal was lodged by Khodorkovsky's lawyers against the arrest.
The company he headed expanded with the merger of the oil giant Yukos and the Russian oil company Sibneft earlier this month. The firm is now worth $50 billion. Its oil and gas production equivalent to 2.35 million barrels per day makes it among the world's largest oil companies.
No one was surprised that the arrest set off waves, and not just ripples.
The company stock plummeted 20 percent Monday. The Russian Trading System (RTS), the stock exchange in Moscow, dropped 10 percent, taking 15 billion dollars off the value of Russian companies.
The Russian Union of Industrialists and Entrepreneurs which represents companies that account for more than half the economy called on President Vladimir Putin to take an immediate stand.
"There will be no bargaining over the work of law enforcement agencies," Putin declared. "All should be equal before the law, irrespective of how many billions of dollars a person has in his personal or corporate account." He urged people to stop "speculation and hysteria" over the case.
It did not stop. "Capitalism with Stalin's Face," said a headline in the Moscow daily Nezavisimaya Gazeta. The arrest "could become a turning point in Russia's history," Izvestia wrote.
"Yukos is Beheaded" ran a headline in the Vedomosti daily. The arrest "raises more than a few questions," the government-owned Rossiiskaya Gazeta wrote. The Moscow Times described the arrest as a coup d'etat by the law enforcement agencies.
It was a dramatic arrest. Armed special police took over Khodorovsky's private jet at Tomilino airport in Novosibirsk in Siberia Saturday. He was flown back to Moscow in a police aircraft.
Later in the day the Basmanny district court in Moscow ordered his detention at the Matrosskaya Tishina prison in Moscow until Dec. 30.
Prosecutors said a search at Yukos brought evidence of tax evasion, fraud and embezzlement of state property that added up to about a billion dollars. Prosecutors also accused Khodorkovsky of failing to pay two million dollars in taxes in 1998-1999.
The probe into Yukos began with the arrest in July of Platon Lebedev, the billionaire Yukos executive believed to be Khodorkovsky's right-hand man. Prosecutors charged Lebedev with defrauding the state of close to 300 million dollars during the privatization of the company in 1994, a time when state-owned properties were being sold off at a pin's fee to Boris Yeltsin's cronies.
Khodorkovsky had anticipated his arrest. He told a news conference in Moscow earlier this month that he would rather go to jail than leave the country as a political exile.
His supporters link the arrest to a larger corporate game. The arrest followed reports earlier this month that Yukos was in multibillion-dollar merger talks with U.S. companies ExxonMobil and ChevronTexaco. Yukos was reported to be seeking a foreign partner to ward off government action.
A possible 40 percent share in YukosSibneft by the U.S. companies triggered the arrest, says Alexey Mitrofanov, deputy head of the Liberal Democratic Party.
A U.S. citizen, Steven Theede, takes over as chief executive officer of the company following Khodorkovsky's arrest. The chief financial officer, Bruce Misamore, is also an American.
With a U.S. acquisition a possibility, the State Department expressed concern over the developments. "We are concerned about the potentially negative implications for the rule of law," spokesman Richard Boucher said.
European Union External Relations Commissioner Chris Patten said Russia must respect the rule of law. He said he expects EU leaders to discuss the case at a meeting with Putin in Rome Nov. 9.
Yukos issued a statement to claim there were "political motives" behind the "absurd" charges against Khodorkovsky and other executives. Khodorkovsky is reported to have funded several opposition parties for the parliamentary elections due Dec. 7. These include the Union of Right Forces and Yabloko.
The effects of the arrest continued through the week. Senior Yukos executive Vasily Shakhnovsky was elected to the Federation Council, the upper house of parliament Monday -- just in time. Shakhnovsky, who was charged with a million dollar tax evasion, will now have immunity from prosecution. Only the Federation Council can decide to prosecute one of its own.
But prosecutors lost no time and flew to Evenkia in Siberia to investigate his election. Yukos has oil exploration and development rights in Evenkia, a region as large as Britain and France put together, with a population of just 20,000.
The pro-Kremlin United Russia party decided to remove Vladimir Dubov, a deputy in the State Duma, the lower house of parliament, from its party list for the December elections. Dubov, chairman of the Duma's subcommittee on taxes, is an associate of Khodorkovsky and a major Yukos shareholder.
October 30, 2003 (http://www.albionmonitor.net) All Rights Reserved. Contact firstname.lastname@example.org for permission to use in any format.
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