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Russia: Blackmail Payments Cost Rosprom Millions, Says CEO

Washington, 8 May 1997 (RFE/RL) - The young Russian industrialist who heads the Rosprom and Yukos oil group of companies says "blackmail" payments extracted by national, regional and local authorities cost his firm "over $100 million a year."

Mikhail Khodorkovsky says these "payments" are in addition to hefty tax bills which he claims are higher than what the company is supposed to pay.

Khodorkovsky is the 33-year-old chief executive officer of Rosprom, the management company which owns and runs Yukos Oil and Menatep Bank. He is in the United States seeking American petrochemical companies interested in partnerships in Russia and looking at private financing on the U.S. market.

Speaking to reporters at the National Press Club in Washington Wednesday, Khodorkovsky said his firm is the second largest oil company in Russia, pumping about half the 56 million tons per year handled by Lukoil, Russia's largest oil firm. With foreign financing of several hundred million dollars, Khodorkovsky says Rosprom could close that gap and perhaps even pass Lukoil in coming years.

For now, he says, the problem of corruption in Russia is a serious one for all businesses. In the area where Yukos oil is headquartered, for example, Khodorkovsky says his firm built and maintains 3,000 kilometers of roads. However, he says the company must buy federal, regional and local highway "passes" for each company vehicle which drives on those roads. "I very much hope that the next tax code will eliminate all of these senseless steps for us," he told reporters.

In addition, he said, there are all kinds of demands for the company to sponsor community projects or make additional social payments. And he says the pressure for these payments is "quite significant." While western companies budget for community donations, these payments in Russia are extracted as if they were taxes. "That puts a big burden on our companies, it comes out of profits," he said.

Khodorkovsky says it is in the interest of everyone in Russia to put an end to corruption in the private sector and in government. He says he offered to show Russian First Deputy Prime Minister Anatoly Chubais "individual line items in the government budget...that were basically licenses for thievery -- that these line items were just simply asking for the money to go off to the side."

Frankly, added Khodorkovsky, "those bureaucrats that steal the money, that siphon off the money, they don't spend it in Russia, they spend it here (in the west)."

Khodorkovsky says his company -- and he personally -- pay all the taxes the government demands, even though he says officials admit the firm should only owe 75 percent of what it is paying. "Still, they demand the full 100 percent," he says. While he wouldn't reveal his own income or the personal taxes he pays, Khodorkovsky says he and his wife account for "about half the taxes" collected by his local tax office.