Posted on 08/17/2003 3:18:12 PM PDT by DPB101
Criminal investigations into the oil-and-banking empire of Russia's wealthiest tycoon have shocked the capital, sent the stock market into a nosedive and even stirred up worries about the fragility of the country's fledgling democracy.
Heavy-handed raids in recent weeks by the tax police and security agencies have targeted Yukos, the conglomerate headed by Mikhail Khodorkovsky, a 40-year-old magnate whose personal fortune is estimated at $8 billion US.
Some observers suggest the Yukos investigations could be the start of a serious Kremlin campaign against Russia's so-called oligarchs, the handful of young businessmen who schemed to take control of key industries and properties that once belonged to the Soviet state. Many of those "privatizations" were carried out in the 1990s through rigged auctions.
That was the template used in 1995 when Khodorkovsky's own bank conducted the auction of then-state-owned Yukos, an auction in which he managed to acquire the oil giant for a small fraction of its value. His bank has since gone bankrupt, but Khodorkovsky still owns 36 per cent of Yukos.
While possible political reasons behind the expanding investigations remain unclear, the raids themselves have featured some of the high-drama, cloak-and-dagger tactics so favoured by Russian security services: all-night searches of corporate offices, secret police wearing hoods and ski masks, and large seizures of company records and computers.
Then there was the arrest and no-bail imprisonment of Platon Lebedev, a longtime friend of Khodorkovsky who heads Group Menatep, the holding company that includes Yukos.
Lebedev, who is Khodorkovsky's personal money manager and a billionaire himself, got wind of his impending arrest and checked into a hospital, claiming high blood pressure and dizziness. The police hauled him off anyway, charging him with fraud in the takeover of a state-owned fertilizer company a decade ago.
Lebedev has been in jail since July 2, and a hearing on his case, scheduled for Wednesday, has been delayed because a witness failed to show up, according to the Interfax news agency. Other investigations of Yukos and some of its officials -- including four murder cases -- are continuing.
Russian President Vladimir Putin has been virtually silent on the Yukos affair, even as the stock market recently plunged by 15 per cent and billions of investor dollars began fleeing the country. Putin did say he was "opposed to arm-twisting and jail cells (as a) method to deal with economic crimes," but most Moscow analysts think the investigations wouldn't be proceeding without his approval.
Yukos produces one-seventh of Russia's oil -- the western-oriented firm sent a tanker-load of crude to Houston last year -- and Khodorkovsky is about to merge his company with Sibneft, another Russian conglomerate. The new company will be the fourth-largest oil producer in the world.
Many Russians have grudgingly accepted the shady privatizations as part of the inevitable chaos and corruption that occurred as the Soviet Union's socialist system morphed into Russia's quasi-market economy. The privatizations even helped create a certain financial stability in Russia, a stability that has been shaken in recent weeks.
One of Putin's closest advisers said continuing political and economic uncertainty over past privatizations could lead to domestic unrest.
"It's not inconceivable that such actions will lead to a new civil war," Putin's chief economic adviser, Andrei Illarionov, said in a radio interview last week. He didn't give any specifics about a possible conflict but said re-examining or reversing the privatizations would be "a Pandora's box (that) will be very difficult to shut."
"Illarionov's comments were somewhat radical, but, yes, revisiting the privatizations and auctions would be disastrous for the country," said Katia Mikhailovskaya, an analyst at the Panorama research institute in Moscow.
Analysts said the Yukos affair also could signal the start of Russia's nasty, pre-election hurly-burly. Parliamentary elections are set for December, and Kremlin strategists might want to show voters the government is finally doing battle with the oligarchs and big business.
Arresting Lebedev -- someone so personally and professionally close to Khodorkovsky -- might be a way of persuading the tycoon to begin contributing money to United Russia, the pro-Kremlin party. Until now, Khodorkovsky has openly financed two opposition parties, Yabloko and the Union of Right Forces.
If nothing else, Khodorkovsky's continuing contributions to Yabloko have apparently violated a three-year armistice between the president and the oligarchs. Putin had agreed to leave the businessmen alone as long as they stayed out of politics.
"The situation should be sorted out," Igor Yurgens, chief lobbyist for the oligarchs, told Itogi magazine. "Everybody must calm down. The rules of the game should be negotiated again."
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