Khodorkovsky quits as Yukos chief

Russian billionaire Mikhail Khodorkovsky quit as head of Yukos, the country’s largest oil producer, in an attempt to distance himself from the company he has run since 1995.

    Khodorkovsky was arrested on 25 October by FSB officers

    The stock rallied as much as 13%, paring last week’s slump.

    Khodorkovsky, Russia's richest man, owns a controlling stake in Yukos. Prosecutors last week froze his shares after he was charged with tax evasion and fraud, a move that rattled investor confidence in President Vladimir Putin's commitment to economic reform.
       
    “I am leaving the company,” Khodorkovsky said in a statement from the Moscow prison where he is being detained. “As the leader of this company, I must do my utmost to lead our... team out from under the attack which has been directed against me and my partners.”

    Khodorkovsky remains the company's biggest shareholder, controlling a 22% stake. Chief Operating Officer, Steven Theede, a former ConocoPhillips executive, has been overseeing day-to-day operations at Moscow-based Yukos since last week.

    Business as usual

    Though it is not immediately clear what difference Khodorkovsky’s resignation will  make to the legal case against him, it may help end the distractions caused by the investigation, allowing new management to focus on the business itself.
     
    Prior to Khordorkovsky’s arrest, Yukos had entered into negotiations to sell part of itself to Exxon Mobil, the world's largest oil firm.

    Many political commentators say Khodorkovsky has been targeted by hawks in the Kremlin for backing political opponents of Putin in the December parliamentary elections.

    Khodorkovsky finances political parties, such as Yabloko and the Union of Right Forces, that oppose Putin. Russia holds parliamentary elections next month and Putin faces re-election in March of 2004. 

    “It may be that this is just a bump in the road, but it may be that it's a harbinger of things to come and the hard liners are in the ascendancy. And until you have some confidence that that's not going to happen, I would not be irrevocably committing myself to any investment in Russia right now”

    Grant McCrea, Dewey Ballantine

    Other prosecutions
        
    In related legal action, another major shareholder is being held on a charge of theft going back to a 1994 privatisation deal and prosecutors say they want to lift the parliamentary immunity of another shareholder so that they can pursue tax evasion charges against him.
       
    “I have to say that this whole scenario is very troubling for any kind of Western investment in Russia,” Grant McCrea of US law firm Dewey Ballantine LLP told AFP.

    “It may be that this is just a bump in the road, but it may be that it's a harbinger of things to come and the hard liners are in the ascendancy. And until you have some confidence that that's not going to happen, I would not be irrevocably committing myself to any investment in Russia right now.”
       
    Putin has dismissed charges he is prosecuting a personal vendetta against the so-called oligarchs – business people who amassed vast wealth after the fall of communism through the privatisation of state-owned businesses.

    Successor
     
    Khodorkovsky, a one-time leader of the Communist Youth League, gained control of Yukos in 1995, when his Bank Menatep paid the state $300 million for 78% of the company. Prosecutors in July arrested Menatep Chairman, Platon Lebedev, and opened an investigation into possible tax fraud at Yukos.

    The company looks set to appoint Chairman Simon Kukes as chief executive, Reuters reported, citing an unidentified person close to Yukos's shareholders.

    Kukes, born in 1946, is the former president of OAO Tyumen Oil Co, who helped negotiate an agreement to sell a $6.75 billion stake to a venture with BP Plc earlier this year.

    A Moscow native, Kukes emigrated to the US in the 1970s, where he worked for US companies including Amoco Oil Co. He returned to Russia as a vice president at Yukos in 1996, then joined Tyumen in 1998.

    Black gold

    Russia is the world's second-largest oil producer after Saudi Arabia and taxes on oil, gas and metals make up 54% of consolidated federal budget revenue. The International Monetary Fund forecasts Russia's economy will grow 6.25% this year because of rising oil production and prices.

    Russia's RTS index has surged as much as 80% this year, as international and local portfolio investors returned to the country after Putin pushed through pro-business policies such as cutting the income tax to a flat 13% from as high as 30%, and allowing the private purchase of real estate.

    The economy has also been helped by the success of the country's rich business people. Apart from Khodorkovsky, they include Vagit Alekperov, president of OAO Lukoil Holding, Russia's second- largest oil company and Vladimir Potanin, who controls the world's top nickel miner through Interros Group.

    SOURCE: Agencies


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