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Affair Yukos - A Hot Election Prelude?

Last Wednesday, Platon Lebedev a close ally of Yukos owner Mikhail Khodorkovsky was arrested and charged with defrauding the state of $280 million in 1994. He was taken in custody out of his hospital bed where he was recovering from a heart attack.

Last Wednesday, Platon Lebedev a close ally of Yukos owner Mikhail Khodorkovsky was arrested and charged with defrauding the state of $280 million in 1994. He was taken in custody out of his hospital bed where he was recovering from a heart attack. At the same time, Alexei Pichugin, the head of security at Yukos, was accused of having organized a double murder last year. Last Friday, Mikhail Khodorkovsky himself spent two hours in the prosecutor's office, answering questions connected to the arrest of Lebedev. However, he claimed that there were no questions about the business of Yukos.

The arrested Lebedev has been a business partner of Russia's richest man, Mikhail Khodorkovsky, since 1989, when what is now as Menatep Group was first formed. The group owns a 61 percent stake in Yukos and Lebedev owns 7 percent of Menatep, which manages around 30 billion of assets including oil and gas, mineral fertilizers, banking and finance, as well as telecommunications. This year, Lebedev was mentioned in the Forbes magazine?s list of the world?s billionaires with an estimated fortune of around $1 billion. However, he tries to keep a low profile and not to draw too much attention to his work.

The deal for which he was arrested for dates back to 1994 when a firm called Volna bought 20 percent of the Kirovsk, Murmansk-based fertilizer minerals producer for $225?000. The deal was tied to the promise to invest another $280 million in the factory. Volna is widely assumed to belong to Khodorkovsky?s empire. The company was sued in 1996 for not keeping its investment promise but at the time of the court ruling, the stake was sold to third parties.

The arrest of Lebedev sent shock waves through the financial markets. In one day, Yukos? shares fell almost 9 percent, which amounts to $2.6 billion loss of market capitalization. It was a reminder to investors that the Russian market might not be as stable as previously assumed and that there are some issues which are not resolved yet. On Saturday, Khodorkovsky tried to reassure his own board and the investor community that the attack was directed at himself and not at Yukos.

Yukos is in the middle of a merger with Sibneft, whose owner Roman Abramovich just bought the British football club Chelsea. The $12 billion merger is to create the fifth largest privately held oil company, only behind Exxon Mobil, Royal/Dutch Shell, BP and ToalFinaElf. Until now, the arrest does not seem to have serious consequences for this merger and it seems that it will go ahead.

Khodorkovsky was probably right when he mentioned that the arrest was an attack against his person. He has used his wealth recently to expand his political influence and has started funding Yabloko and the Union of Right Forces, two liberal parties which are main competitors of the Kremlin backed party, United Russia, in the coming parliament elections. Khodorkovsky is known for his own political ambitions and expected to be eager to become Prime Minister in 2008.

The reaction of the politicians was fierce. Boris Nemtsov, the leader of the Union of Right Forces accused the Kremlin of using intelligence service methods which would make Russia less interesting for foreign direct investments and clear the stage for a nationalization of industries. Grigory Yavlinsky, the Yabloko leader denounced the action as a political purge against the opposition short ahead of the parliament elections. The government would hamper the attempts made by Yukos to become an independent and transparent company.

However, there are political implications that go further than Yukos or Mikhail Khodorkovsky. Vladimir Putin made once the promise that the wealth accumulation in the country will not be revisited but on the other hand he also wanted to keep oligarchs and big business out of politics. The Kremlin has now sent a message to Khodorkovsky to stay out of business or to share the faith of the exiled Boris Berezovsky and Vladimir Gusinsky. But as Khodorkovsky seems less willing the fight the current administration he might get away from the current affair. It is also very unlikely that equal measures are applied to other oligarchs. Vladimir Potanin for example was seen at an event, organized by United Russia, where he showed support for the Kremlin. The message is therefore very clear: ?as long as you stay out of politics and stick to your business, you are safe?. It will be interesting to see how Mikhail Khodorkovsky will react to the latest challenge.


Source : Neftegaz.Ru