An Offer to Foot the Yukos Bill July 23, 2004
A shadowy group of business people in London offered to "solve" the financial troubles of Russian oil giant Yukos on July 23. The Russian government is not about to let that happen.
On July 23, a group of investors based out of London submitted an offer to the embattled Russian oil firm Yukos: $8 billion to $10 billion in cash -- enough to pay all of the firm's back taxes -- in exchange for the shares held by former Yukos CEO Mikhail Khodorkovsky and control of the company.
Khodorkovsky used the economic might of Yukos to launch himself into Russian politics -- a move that Russian President Vladimir Putin viewed as a threat to his vision of Russia. Consequently, the past 13 months have seen Khodorkovsky and his allies either flee for asylum elsewhere, or be arrested and charged in Russia. The Russian government has been steadily chipping away at Yukos to ensure that it can never be used as a springboard again. The Justice Ministry is in the process of preparing to sell the company's assets to pay its back tax bills, a process that will mean the death of Yukos.
The London-based investors would like to stop that process by purchasing Khodorkovsky's shares, giving the company enough money to pay its tax bill. This is an offer that the Russian government will turn down flat.
This is not simply a case of paying a bill. Putin is committed to seeing Yukos and Khodorkovsky permanently separated -- and Yukos neutered. The government's decision to use back taxes as the hammer to smash Yukos was nothing more than reaching for the most convenient tool. Putin would turn down the offer even if the investors were perfectly legitimate.
The real issue is that they likely are not.
Stratfor sources within Europol, Russia's Interpol and elsewhere within the Russian law enforcement community tell us that among the list of rogue investors are the names of established Yukos hands: Leonid Nevzlin, Mikhail Dubno, Yuri Dubov and even Khodorkovsky.
The "investors" are simply the people who have been the powers behind MENATEP -- the holding company that owns most of Yukos -- all along. The bulk of them are the people that Putin has been trying to excise from Russian politics for some 13 months. Other names affiliated with the investors involve some serious heavy hitters in the world of international investment -- some of whom have been indicted in the United States for past financial scandals -- who have been affiliated with Khodorkovsky for some time.
The cloak-and-dagger trappings of the mysterious "foreign investors" are nothing more than a ruse to stir up international pressure on Putin so he will back down. The pressure is indeed coming: U.S. Ambassador to Russia Alexander Vershbow has already been to Yukos headquarters; he and a host of European diplomats have been sharply critical of the government's crusade against Yukos.
It will not work.
Putin views the oligarchs in general -- and Khodorkovsky in particular -- as a threat to both his power and his vision of Russia's future. Khodorkovsky had his chance to cut a deal a year ago; it is far past the time that he can buy his way out of his hubris. The government froze Yukos shares months ago so they cannot be "sold" in the manner that the "investors from London" are recommending without explicit government approval.
Putin will see Khodorkovsky safely to prison -- and Yukos safely to the chopping block.
Looks like Western analysts finally grasped Russian realities. Last two days on Russian stock market proved them correct. YUKOS stock is falling down with maximum speed possible.
On other hand, that development will not harm Russian economy more than it is already harmed. Because all western investors that could panic took their assets out long ago.