Russian officials express concern

Prime minister, others criticize Yukos inquiry, seizure of oil giant's stock

November 01, 2003|By Robyn Dixon | Robyn Dixon,LOS ANGELES TIMES

MOSCOW - As Russian President Vladimir V. Putin faced the biggest crisis of his leadership, Russian Prime Minister Mikhail Kasyanov said yesterday that he was "deeply concerned" about authorities' seizure of a large chunk of shares in Yukos Oil Co.

In a rare expression of public defiance, top pro-market officials expressed their alarm about Russia's direction. They spoke out at the end of a tumultuous week that saw the jailing of the country's richest man and the seizure of his company's shares, panic in Russia's financial markets, and the resignation in protest of the president's chief of staff, Alexander Voloshin.

After Thursday's market plunge, Kasyanov said it was difficult to predict the implications of the share seizure.

"The arrest of these shares in a private company that is trading on the market is a new phenomenon, the consequences of which are hard to assess," he said.

Another leading pro-market figure, Anatoly Chubais, head of the electricity monopoly UES, bluntly described Voloshin's departure from the presidential administration as "bad and serious."

He said it could be a sign that Russia had embarked on a new and worrying course, not just in terms of a power shift in the Kremlin, but in the authorities' attitudes to democracy and business.

"The events of the last few weeks have elements that have to be interpreted as a change of course," said Chubais, adding that the situation would become clearer in the coming weeks.

On Thursday, the Russian economic development and trade minister, Arkady Dvorkovich, said the Yukos case would force investors to consider the potential risk of "past sins" committed by Russian companies.

"The risk that past sins will be re-examined exists, and this risk should be included in all investment projects in Russia," Dvorkovich said.

His comments were referred to the chaotic privatization free-for-all of the 1990s, when tycoons with Kremlin connections snapped up valuable state assets at bargain prices, often cutting legal corners and evading taxes.

Mikhail Khodorkovsky was Russia's richest oil tycoon before he was jailed last Saturday, pending trial on tax evasion and fraud charges, in an arrest seen as political.

The jailing of Khodorkovsky and the departure of Voloshin are seen by analysts as a signal of the rise of a powerful group of former KGB officials, appointed to the Kremlin by Putin, himself a former spy. Voloshin was regarded as a more moderate pro-market figure who supported the tycoons - or oligarchs - and balanced the power of the rising hawks in the Kremlin.

The Yukos scandal has shattered the air of economic stability that had surrounded Putin's presidency and had attracted foreign investors, with Russia relying on its huge oil reserves to service a hefty foreign debt.

The pursuit of Khodorkovsky, who tried to increase his political clout by funding opposition parties, has also raised fears of a shift to a more authoritarian style, where no alternative center of power is tolerated.

The plunge on Russia's markets was stemmed yesterday after Putin reassured a group of Russian and foreign investors during a meeting Thursday that he was committed to a free market. He reportedly likened the Yukos case to the Enron scandal in the United States.

Putin's decision to appoint a technocrat from his hometown of St. Petersburg, Dmitry Medvedev, to replace Voloshin also allayed market fears that he might put a hard-liner in the job.

The benchmark RTS index gained 1.9 percent after Thursday's 10 percent drop. Yukos shares, which plummeted to $10.56 on Thursday, recovered slightly to $11.20 yesterday, still well below the Oct. 16 figure of $15.63, before Khodorkovsky's arrest.

Amid criticism that they had gone too far, Russian prosecutors released 4.5 percent of the frozen Yukos shares yesterday because they belonged to people other than Khodorkovsky and two associates also charged with fraud and tax evasion - Platon Lebedev, who is in jail, and Vasily Shakhnovsky.

Putin has said he won't interfere with the prosecutor general's office as long as it acts legally, but Russian business and media are now calling on him to rein in prosecutors and end the ambiguity over whether other big tycoons would be pursued for past crimes.

The Los Angeles Times is a Tribune Publishing newspaper.

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