The Russian stock market plunged 8.14 % on Thursday after the government action.

The RTS index closed 8.14% lower at 496.66 points, and has lost nearly 17% in just four days following the arrest of Yukos chief executive Mikhail Khodorkovsky.

The prosecutor general's office said on Thursday it had sequestered 44.1% of shares in Yukos owned by its holding company, but denied the aim was to strip Khodorkovsky of his dominant stake in Russia's largest oil producer.

Khodorkovsky owns 59.5% of the frozen stake, prosecutors and analysts said.

Khodorkovsky was arrested by
armed agents from Russia's FSB

Shares in Yukos tumbled 5% within minutes of the report of the freezing, which came about an hour before the market closed.

Yukos shares ended 14.05% lower at 10.40 dollars. The share has shed 35% of its value since 17 October.

"This is the worst nightmare in the spectrum of possibilities" in the Yukos affair, Konstantin Rexnikov, an oil sector analyst at Alfa Bank, said Thursday.

"The investors have lost tonight. They have the impression that the Yukos affair is out of control," he said.

Khodorkovsky, whose oil group has been at the c

"The investors have lost tonight. They have the impression that the Yukos affair is out of control"

Konstantin Rexnikov
Alfa Bank

entre of a wide-ranging fraud investigation for months, was pulled off a corporate jet at a Siberian airport at dawn on Saturday and flown back to Moscow.

The tycoon, whose fortune was estimated by Forbes business magazine earlier this year at eight billion dollars, was charged on seven counts of fraud and tax evasion and imprisoned.

The arrest has been widely seen in Moscow as politically motivated after Khodorkovsky financed opposition parties standing in the 7 December parliamentary elections.