Publication: Eurasia Daily Monitor Volume: 1 Issue: 131

Yukos was hit by a series of new blows on November 18. The embattled oil company’s chief lawyer, Dmitry Gololobov, told reporters in London, where he was on a business trip, that he had been placed on Russian and international wanted lists at the request of the Russian Prosecutor General’s Office. Gololobov is accused, among other things, of embezzling shares in Tomskneft, a Yukos subsidiary, in 1998. Gololobov said the case had been unsuccessfully investigated for four years and resumed “for the simple reason that I am Yukos’ lawyer and have been working hard to protect the company’s interests both in courts and law enforcement agencies,” Interfax reported.

Meanwhile, Alexei Kurtsin, who is deputy director Yukos-Moskva, a key Yukos subsidiary, was arrested on charges of embezzling 22 million rubles (approximately $770,000). Kurtsin allegedly transferred the money to the bank account of a charity fund for the handicapped in Udmurtia in June but never used it for its intended charitable purposes. According to Kommersant, Kurtsin may simply have been a target of opportunity in the broader anti-Yukos campaign: in the daily’s view, investigators arrested him both “to show society by means of another criminal case that ‘Yuko is, as usual, stealing’, and to . . . promise to free him in exchange for valuable evidence concerning the company’s shareholders, which the prosecutor’s office lacks in the cases now before the courts against [former Yukos CEO] Mikhail Khodorkovsky and [key Yukos shareholder] Platon Lebedev, as well as the many other cases within the framework of the campaign against Yukos” (Kommersant, November 19).

All in all, it was a particularly bad week for Yukos. On November 17, Russian law enforcers raided its main office in Moscow and the office of its main production unit, Yuganskneftegaz, in the Siberian city of Neftyugansk. A law-enforcement source told Interfax that the search was carried out as part of the probe into Yukos’ tax debts for 2000. The previous day, the tax authorities handed Yukos a bill for unpaid taxes for 2002 amounting to 190 billion rubles, or $6.76 billion. That came on the heels of a court decision upholding the tax authorities’ bill to Yukos for back taxes for 2000 totaling 99.375 billion rubles (approximately $3.48 billion) (RIA-Novosti, November 17). Yukos’ bill for unpaid taxes now totals a whopping $18.5 billion (Moscow Times, November 19).

Yukos’ tax bill is set to grow even larger: a source in the tax authorities told Interfax on November 18 that company affiliates like Tomskneft, Samaraneftegaz, and the Achinsk refinery are likely to be hit soon with bills for back taxes for 2001. In addition, the source said that an audit of Yukos for 2003 would likely produce a slightly larger bill than for 2002, given that the company “used the same [tax evasion] schemes” but that its “extraction and exports volumes grew.” The Justice Ministry has said it will sell off Yuganskneftegaz to cover Yukos’ tax arrears.

Yukos’ travails continue to elicit contradictory responses in the West. The Committee on Legal Affairs and Human Rights of the Parliamentary Assembly of the Council of Europe (PACE) on November 18 adopted a report prepared by former German Justice Minister Sabine Leutheusser-Schnarrenberger stating that the circumstances surrounding the arrest and prosecution of top Yukos executives strongly suggest that they were “arbitrarily singled out” by the Russian authorities, violating the principle of equality before the law. According to PACE’s website, the report, which was based on a legal analysis of the facts surrounding the arrests and prosecutions of former Yukos executives Mikhail Khodorkovsky, Platon Lebedev and Alexei Pichugin, found that their prosecutions went beyond the mere pursuit of justice to include such elements as “to weaken an outspoken political opponent, intimidate other wealthy individuals, and regain control of strategic economic assets.” Khodorkovsky and Lebedev have been charged, among other things, with fraud and tax evasion, while Pichugin has been charged with murder. The have been in jail since October, July, and June of 2003, respectively.

The European parliamentarians said in a draft resolution that the actions against the Yukos executives bore the hallmarks of “a coordinated attack by the state.” The parliamentarians also said that the legal proceedings against the Yukos executives were replete with “shortcomings in medical attention,” delays that prevented their lawyers from “entering into contact with them,” “denial of access of defense lawyers to the court-room,” “search and seizure of defense documents and alleged eavesdropping of defense lawyers,” and “unjustified restrictions on the publicity of certain court proceedings.” Russian members of the PACE committee, however, issued a dissenting opinion, stating that the report was “based only on the opinion of the defense.”

While the PACE committee was raising alarms about the Yukos case, Fitch Ratings announced that it had raised its Russia sovereign rating to investment grade. The international credit rating agency said that the upgrade was testimony to Russia’s “remarkable improvement in creditworthiness over recent years.” Russia’s “exceptional macroeconomic performance, helped by high oil prices and broadly prudent fiscal policy,” is “continuing to lead to marked declines in its public and external debt ratios, a massive accumulation of foreign exchange reserves and a build-up in its oil stabilization fund,” Fitch’s stated. It added that while the Yukos affair “is a clear negative development that raises concerns about the robustness of property rights and the commitment to further market-orientated reforms . . . worries that it signaled the start of a more general campaign of property redistribution have not been realized nor has its escalation this year precipitated an acceleration of gross capital flight, which after jumping in the third quarter of last year, appears to have stabilized at around $6 billion a quarter”(Prime-Tass, November 18).

President Vladimir Putin’s economic aide, Andrei Illarionov, recently warned that the campaign against Yukos “is starting to have economic consequences” and should be halted (see EDM, November 12).