Several people have inquired on the open thread what's going on in Russia.
Below is some key information about the arrest of Mikhail Khodorkovsky, Russia's richest man.
Mikhail Khodorkovsky is the owner of
YUKOS OIL one of the big oil giants in Russia today (along with
LUKOIL).
He was arrested and charged with Fraud and Tax Evasion.
From The Economist:
MOST observers at least agree on one thing now: that the prosecutors' campaign against Russia's biggest oil company, Yukos, which culminated in the arrest of its boss and major shareholder, Mikhail Khodorkovsky, had President Vladimir Putin's approval. Nobody but he, it is generally assumed, could sanction the arrest of the country's richest man and most public businessman. But Mr Putin is unlikely to approve of the way in which the arrest has become something of a political and macroeconomic crisis, leading to accusations of foul play and shaking the Moscow stock exchange and the rouble. Indeed, the affair has left a lot of investors feeling almost as uncomfortable as Mr Khodorkovsky, especially after Russian officials seized a 44% stake in Yukos on Thursday October 30th. A top Kremlin aide has resigned over the affair.
Since the first arrest of a Yukos shareholder, Platon Lebedev, in July, followed by a series of investigations into misdeeds at Yukos and related companies, Moscow has been awash with conspiracy theories about the motive behind it all. Mr Khodorkovsky was clearly a threat to the power both of the state itself and of people linked to state-owned businesses. He reputedly used his lobbying power in parliament to block a draft law on oil-industry taxation, had spoken out against the government's policy on pipelines, alleged that there were corrupt deals in state firms in a public meeting with Mr Putin, and hinted at political ambitions in the future.
But was the campaign against Yukos initiated by Mr Putin, in response to Mr Khodorkovsky's increasing political influence? Or was it, as Yukos itself has repeatedly alleged, the work of a group of Kremlin cronies, most from a security-service background, fighting for control against another Kremlin clan close to big business? Was the ultimate goal to confiscate Mr Khodorkovsky's wealth, to put out his political fire, or just to carve off a slice of the empire that he has built up since acquiring state assets for a song in the 1990s, as several other top "oligarchs" did? Was it an attempt to scare foreign companies away from buying a stake in Yukos--both ExxonMobil and ChevronTexaco have been discussing just such a move--so that Russian oil would remain in Russian hands? Or was it merely an attempt to get rid of Mr Khodorkovsky himself before they buy, since with a big foreign partner he would be virtually untouchable?
The most probable explanation is some mixture of them all. Mr Khodorkovsky had made more than enough enemies to get into trouble. All the same, some think that Mr Putin, like Henry II asking who would rid him of the meddlesome priest Thomas à Becket, may have authorised the investigations into Yukos without realising what they might lead to. Or he may simply have thought that Mr Khodorkovsky would do the rational thing and back down. Instead, however, the oil baron went on making speeches about his persecution, buying a newspaper (oligarch-controlled media companies are one of Mr Putin's great bugbears) and continuing to use his political influence: earlier this month, no less than 101 members of the Duma, the lower house of parliament, signed a letter to the chairman of the court that is investigating Yukos, complaining about the alleged mistreatment of one of the suspects. Alexander Voloshin, the Kremlin's chief of staff and no friend of the secret-service clan that has been out to get Mr Khodorkovsky, submitted his resignation over the oil man's arrest; Mr Putin announced Mr Voloshin's departure on Thursday. Dmitry Medvedev, who has served as chairman of Gazprom (another Russian energy giant), has taken his place.
On the face of it, the hounding of Mr Khodorkovsky is similar to the campaigns against Vladimir Gusinsky and Boris Berezovsky, two other magnates who were stripped of most of their assets and chased out of Russia three years ago. Then, too, Mr Putin feigned distance from the affair; but it became clear that the two men, both of them close advisers to Mr Putin's predecessor, Boris Yeltsin, were being punished for refusing to stick to the terms of Mr Putin's bargain with the oligarchs to stay out of politics. After they left, those businessmen who kept to the rules were free to keep increasing their wealth.
There has, predictably, been an outcry about the damage that Mr Khodorkovsky's arrest could do to investor confidence. The Russian stockmarket fell, dragged down by Yukos shares, when trading opened on Monday. The oil firm's shares slipped further on Wednesday, on news that prosecutors were seeking to have another big shareholder, Vasily Shakhnovsky, stripped of his parliamentary immunity so he can face charges of tax evasion. By Thursday's close (after the seizure of Mr Khodorkovsky's shares), Yukos shares had lost more than a quarter of their value since his arrest, though they regained some ground on Friday.
Meanwhile, for foreigners who do business in Russia, Mr Khodorkovsky's arrest is unnerving but it may not necessarily change their views; most already know that their best protection is still not the law but their krysha, or "roof"--a well-connected power broker. Mr Putin, the best-connected power broker of them all, said on Monday that he would not enter into any bargains to limit the Yukos investigation, but neither would he extend it into a broader campaign against those who got rich in the 1990s. He called for an end to "all speculation and hysteria" about the arrest, and told investment bankers on Thursday that his support of market economics was unchanged.
Hysterical or not, some rich Russians do now feel their country a less safe place to be rich in. The net capital inflows that drove up the stockmarket earlier this year have turned into net capital flight since Mr Lebedev's arrest. A few oligarchs, such as Roman Abramovich--the oil magnate who bought Chelsea, a top English football club--have been steadily selling off their Russian assets. Others have simply left: Leonid Nevzlin, one of Mr Khodorkovsky's associates, recently applied for Israeli citizenship. The oligarchs' money had a big role to play in building up Russia's economy; an important source of the growth that Mr Putin desperately wants is going to be lost.
And while the purges of Mr Gusinsky and Mr Berezovsky might have been excused as a new president's house-cleaning and a way to bring some stability after the chaotic Yeltsin years, the attack on Mr Khodorkovsky shows that stability is somewhat illusory. Though the laws and conditions for investment have improved greatly in the past few years, there remains an underlying conflict between capital and the state, a by-product of Russia's enormous concentration of wealth. Economic reform will not solve that; only economic diversification, a much slower process, will.
This is YUKOS official reply:
Moscow, 30 October 2003 -The Board of Directors of YUKOS Oil Company expresses its full support for and confidence in the Company's management. The Board of Directors firmly believes that if open and public court hearings take place, all allegations against Mikhail Khodorkovsky and his arrest will be declared invalid.
The Board of Directors believes that the latest events around Yukos will not have a material impact on the Company's operational and financial activities. As the acknowledged leader of the Russian oil and gas sector, YUKOS Oil Company has a strong management system and team in place. Further, the Board of Directors commends Mikhail Khodorkovsky for his significant contribution to the achievements of the Company.
PRAVDA jumps on the bandwagon with several related stories:
YUKOS may go bankrupt - There is a possibility that YUKOS will be announced bankrupt, analysts with Veles Capital reported to RBC. They explained that some London banks were questioning the syndicated credit granted to YUKOS after the company's 44-percent stake had been frozen by the Russian General Prosecutor's office. Several banks, BNP Paribas, KBC Bank, UFJ Bank and Dresdner, were planning to share the credit but now this agreement is about to fail. The analysts say that banks may demand a return of the credit, and YUKOS will hardly manage to meet its debt obligations since its balance sheet will be nearly zero after the payment of interim dividends. At the same time, the experts admitted this possibility was not that likely, and still they recommended abstaining from purchasing YUKOS shares.
US Dollar jumps on frozen YUKOS shares - The weighted average dollar rate jumped RUR0.12 at the opening of today's special trading session against the official dollar rate for October 31 and reached RUR29.98. Currency experts stressed that the high on dollars reached RUR30.05. They unanimously link this noticeable strengthening of the dollar to frozen YUKOS shares. Analysts noted that the ruble had begun retreating after the related information yesterday evening and surpassed the RUR30 level. Another factor was the dismissal of Alexander Voloshin, the head of the president's administration, along with other reshuffles in the Kremlin. However, the volume of dollar purchases remains rather low, which, together with ruble support by the Central Bank, rules out a rapid rise in the dollar.
And finally a poll:
Russians dislike oligarchs - Most Russians (53%) dislike businessmen with a lot of economic and political power. This was the result of a national survey entitled Business and Society carried out in August and September by ROMIR Monitoring together with the newspaper Expert and the organization Delovaya Rossiya [Business Russia]. On the other hand, 43% of respondents gave a positive appraisal of Russian oligarchs. However, 74% said that in terms of personality, there is not one oligarch that particularly appeals to them. 4% said they liked Roman Abramovich, Mikhail Khodorkovsky, Anatoly Chubais and Vladimir Potanin.
1500 Russians over the age of 18 took part in the survey.
And finally NOVOSTI news agency provides a translation of the daily Russian paper GAZETA with this:
Though news of the arrest of the shares of Group Menatep, a Gibraltar offshore and the main co-owner of Yukos, was made public barely an hour before closing time at stock exchanges, the reaction was immediate, writes the newspaper. Yukos shares dropped by nearly 14%, which cost shareholders $3.8 billion. Investors believe that if the state manages to confiscate a major stake from the oil company's managers, its market value may be halved.
Yukos shares will continue to fall today and in the next few days, say experts. The market reaction to the news yesterday evening could not be complete. This means that the recent forecasts about the beginning of a long period of stock market growth have been proved false. Moreover, the "Yukos factor" can prove fatal for the markets.
Hope this helps and I hope you aren't sick of reading so much by this point!