Accessibility links

Breaking News

Russia: Yukos Case Increasingly Drawing Ire Of International Groups

The deadline has passed for Russian oil giant Yukos to pay some $3.4 billion in back taxes or face bankruptcy, and the company's fate remains in doubt. Outside Russia, the Yukos case continues to invite concern and, in some cases, strong criticism. The Paris-based Organization for Economic Cooperation and Development (OECD) this week accused Russia of applying its laws selectively as a way of punishing Yukos and its founder and former chairman, Mikhail Khodorkovskii.

Prague, 8 July 2004 (RFE/RL) -- The Russian government's case against Yukos might be damaging the country's reputation abroad.

The Organization for Economic Cooperation and Development (OECD) this week criticized the Yukos case as an example of Russia applying its laws selectively. It said judicial decisions in Russia are often based on political considerations.

OECD representatives were not immediately available for comment, but the report implied that thousands of Russian firms -- large and small -- are guilty of the same tax-evasion charges as Yukos -- but that the oil giant had been singled out.

The report is merely the latest in a series of international condemnations of the Yukos proceedings. Many view the case as having little to do with economic crimes and much more as a contest of wills between Khodorkovskii and Russian President Vladimir Putin.

Yukos stands accused of abusing tax laws to avoid billions of dollars in taxes. Authorities have ordered the company to repay some $3.4 billion in arrears from 2000 and froze Yukos's bank assets in lieu of payment. The courts also ruled that Yukos cannot sell any physical assets to make the payments.

The company denies the allegations and says that without access to its bank or other assets, it faces bankruptcy. The payment deadline expired yesterday, and Yukos spokesman Hugo Erikssen repeated today that his company is seeking a compromise.

"We will continue producing our oil, selling our oil," Erikssen said. "We are willing to reach a compromise, but with our bank accounts and assets frozen, that will be increasingly difficult as time goes by. But we are very interested in finding an amicable solution that will allow us to pay our taxes, although we do dispute the legality of the claim."

Khodorkovskii, meanwhile, remains in a Russian jail, where he awaits trial on separate fraud and tax-evasion charges related to Russia's controversial privatization program of the 1990s. Critics of the privatization drive -- including Putin -- argue it allowed businessmen like Khodorkovskii to enrich themselves improperly at the expense of the Russian people. Supporters say it was a flawed but necessary first step in the country's transformation to a market economy.

One of the main organizations monitoring the case is the Strasbourg-based Council of Europe. Sabine Leutheuser-Schnarrenberger, a former German justice minister, was recently appointed by the Council's Parliamentary Assembly to observe the process. This week, she gave an interview to RFE/RL's Russian Service.

"My mandate -- which came into being in the past year -- is to focus on the arrests of [Yukos executives] Khodorkovskii, Platon Lebedev, and Aleksei Pichugin [as well as] everything concerning Yukos and also the conditions of the court proceedings and the imprisonment," Leutheuser-Schnarrenberger said. "What [falls outside of my domain] is whether the actual charges of tax evasion, etc., against Yukos are justified."

In May, she traveled to Moscow with the hope of meeting Khodorkovskii in prison and assessing conditions there. She was denied the visit under a legal technicality.

"[In May,] I announced my intention and expressed my desire to visit and speak with Khodorkovskii and Lebedev in prison," Leutheuser-Schnarrenberger said. "The message was given to me -- everything went through our Russian colleagues. The messages were relayed to me from the [Russian judge] that my visit would not be allowed."

She says the Council of Europe is concerned over the possible abuse of Khodorkovskii's rights as he is forced to wait out a lengthy pretrial period in prison. She points out that everyone -- rich or poor -- is equal before the law and that the presumption of innocence applies to all.

Concern over the Yukos affair is not universal. Some on the other side say Russia should be free to pursue possible violations of its laws as it sees fit. They argue that Yukos, in fact, is not an isolated example but could mark the start of a more comprehensive review of the privatization process.

Mikhail Bernstam is a research fellow at the Hoover Institution at Stanford University in the United States. He told RFE/RL correspondent Yuri Zhigalkin this week that Russia's sovereignty should be respected.

"It would be absolutely impractical and absurd for the U.S. government [or any other state or organization] to interfere in a tax dispute in any country, including Russia," Bernstam said. "If a state has sovereign rights, those include the rights to collect taxes and outstanding debts."

Khodorkovskii is scheduled to appear in court again on 12 July.

(RFE/RL's Russian Service contributed to this report.)
  • 16x9 Image

    Mark Baker

    Mark Baker is a freelance journalist and travel writer based in Prague. He has written guidebooks and articles for Lonely Planet, Frommer’s, and Fodor’s, and his articles have also appeared in National Geographic Traveler and The Wall Street Journal, among other publications.

RFE/RL has been declared an "undesirable organization" by the Russian government.

If you are in Russia or the Russia-controlled parts of Ukraine and hold a Russian passport or are a stateless person residing permanently in Russia or the Russia-controlled parts of Ukraine, please note that you could face fines or imprisonment for sharing, liking, commenting on, or saving our content, or for contacting us.

To find out more, click here.