18 July 2003, Volume
NOTE TO READERS:
The next issue of "RFE/RL Organized Crime and Terrorism Watch" will appear on 31 July.
THE CASE OF YUKOS AND SIBNEFT
By Roman Kupchinsky
On 4 July, Russian federal prosecutors questioned Mikhail Khodorkovskii, who is reportedly the wealthiest man in Russia, about allegations that a business partner had defrauded the Russian state of $283 million in a 1994 privatization deal. Khodorkovskii, whose fortune was estimated at $8 billion by "Forbes" in March, is the head of Russia's premier oil company, Yukos.
Two days earlier, on 2 July, authorities had detained Platon Lebedev, a major Yukos shareholder and the head of Yukos financial arm Menatep, on fraud charges. Lebedev, whose net worth was estimated by "Forbes" at $1 billion, was initially detained without charges for 48 hours. But he was subsequently charged in connection with the alleged embezzlement in 1994 of $283 million from a Murmansk-based, state-owned company called Apapit.
According to the "Financial Times" of 4 July, "The move triggered a sharp fall in Yukos shares and cast a shadow over the planned $35 billion merger of Yukos with rival Sibneft. However both groups insisted that the deal would be finalized as planned by the end of this year.
"The actions against Yukos come in the build up to Russia's parliamentary elections in December. They risk threatening the informal agreement reached by Mr Putin with the country's influential 'oligarchs' early in his term -- that he would not re-examine the contested privatizations through which they acquired assets if they withdrew from politics." The implications of such a reversal by Putin threaten Russia's financial stability, according to a number of observers quoted in the Russian media.
Khodorkovskii has not been discreet about his political ambitions. He has funded two liberal opposition parties and has warned that pro-Kremlin forces could change the Russian Constitution if they gain a two-thirds majority in parliament.
"The Moscow Times" wrote on 7 July that the day after being questioned by prosecutors, Khodorkovskii said the fraud charges brought against his business associate and the pressure being put on Yukos are the result of a Kremlin power struggle.
"My opinion is that what we are seeing here is the beginning of a fight for power between various branches of the sphere around Vladimir Vladimirovich [Putin]," Khodorkovskii said in an interview with Ekho Moskvy radio posted on its website (http://www.echo.msk.ru). "It is obvious to me, although I'm not a professional political scientist, that Putin will get a second term. The question is who is going to form the second echelon of his team. That, of course, is today the question."
The Prosecutor-General's Office on 8 July ordered an investigation into allegations by Rosneft President Sergei Bogdanchikov regarding Yukos's alleged misappropriation of Rosneft's 19 percent stake in Yeniseineftegaz, according to Interfax news agency. A spokesman for the Prosecutor-General's Office suggested a criminal case might be launched as a result of that investigation. At least four criminal cases involving Yukos have been launched in recent days. The scandal rapidly escalated when, on 10 July, armed men in masks, apparently without search warrants according to the BBC, broke into the Yukos offices and began a search of the premises for documents relating to the privatization of various Russian state-owned properties in 1994. According to RFE/RL on 11 July, a lawyer for Yukos, Albert Mkrtychev, stated in Moscow: "I think this [search of the company's archives] was illegal, because our lawyer should have been allowed inside immediately [by the police] instead of having to explain what was going on. In any case, they should have shown their warrant to our lawyers." At the same time, the head of the Russian Union of Industrialists and Entrepreneurs, Arkadii Volskii, was in the Kremlin, where he allegedly handed President Vladimir Putin a letter from leading Russian businessmen urging Putin not to endanger the state's relationship with the private sector. Putin was quoted by Volskii on the BBC as saying that he believed such measures were "excessive." This, however, did not stop the masked men who went ahead with the search of the Yukos headquarters.
According to the BBC report, "[Volskii] said the high-profile case of Yukos was triggering a chain reaction in the provinces, where local elites were only too happy to review the privatization deals."
The speaker of the Russian lower house, Gennadii Seleznev, inflamed the situation further by telling journalists in Rotterdam on 8 July, according to ABN: "I think that the prosecutor and Audit Chamber should examine the phenomenon of where dollar-denominated billionaires came from in Russia over eight-to-nine years." He concluded, "In nine out of 10 cases, these billions appeared because Russian law was broken."
The next move in this Kremlin offensive came on 11 July, when it was announced that prosecutors office were investigating a case against Sibneft, a major oil company owned by Roman Abramovich that had announced plans to merge with Yukos. That same day, a special was aired on Russian television showing the purported lifestyle of Abramovich, including images of his 100-meter, $90 million yacht, "Le Grand Bleu," and past parties onboard the craft. The decision to expand the investigation and include Sibneft led some analysts to speculate that the current wave of investigations seems to be focused on companies owned by Jews, suggesting such a choice might be motivated by looming election campaigns. Previous accusations against Boris Berezovskii -- including allegations of his involvement in the contract killing of Duma opposition leader Sergei Yushenkov -- might support this conclusion in the minds of some theorists. "The Moscow Times," in an editorial comment on 4 July, wrote: "The message from the Kremlin is clear: [Khodorkovskii] should stick to what he does best -- pumping crude -- or he may end up another Jewish oligarch in exile, like [Berezovskii] and Vladimir [Gusinskii], who Putin chased out of the country before the ink on his first presidential decree was even dry."
"The Moscow Times" on 9 July reported that the letter from Russian businessmen to Putin strongly implied that the Russian Security Service (FSB), particularly Chairman Nikolai Patrushev, has been instrumental in the crackdown. Many voices in the Russian media have opined that the Yukos case is connected to mid-level Kremlin infighting. It is apparent that Putin knows perfectly well what is going on, and arguably he is being highly selective in his choices for prosecution. Gazprom, the state gas monopoly that has been implicated in dealings with organized crime and is actively supportive of Putin's re-election, has managed to avoid any investigation. Meanwhile Yukos, whose CEO Khodorkovskii has been openly funding political parties opposed to President Putin, has became the object of a major investigation.
INDICTMENTS FILED AGAINST SENIOR RUSSIAN POLICE OFFICERS.
Russian prosecutors filed charges on 2 July against six senior law-enforcement officials, including Lieutenant General Vladimir Ganeev, who were arrested on 23 June for extorting large sums of money from individuals who allegedly had compromising evidence placed on them and were then forced to pay money to the ring in order to have charges dropped (see "RFE/RL Organized Crime and Terrorism Watch," 10 July 2003). According to "RFE/RL Newsline" of 3 July, Ganeev maintains his innocence and is not cooperating with the investigation. He is demanding that his case be transferred to the Military Prosecutor's Office in order to minimize publicity. Emergency Situations Minister Sergei Shoigu, Ganeev's boss, said he has doubts that Ganeev is guilty. "Only the courts can decide this," Shoigu added, according to ORT on 2 July. Prosecutors also brought charges against the other six officers involved: Yevgenii Taratorkin, Yurii Samolkin, Igor Ostrovskii, Aleksandr Breshchanov, Vadim Vladimirov, and Nikolai Demin. The six face seven-count indictments on charges ranging from ordering murders to extortion and fabricating evidence in criminal cases. They reportedly face a maximum sentence of life in prison. RK
WORLD BANK BOASTS OF ITS RECORD ON CORRUPTION.
"The one thing I'm proudest of is our work on corruption," World Bank President James D. Wolfensohn was quoted as saying in "The Washington Post" of 4 July. In a story outlining how Wolfensohn has reoriented the bank toward zero tolerance of corruption by its clients, the paper cited a bank report saying it has blacklisted 100 companies and individuals suspected of corruption and has instituted some 600 anticorruption projects in nearly 100 countries since 1996. "The Washington Post" quoted William Easterly, an economics professor at New York University, who said that the bank "has a long way to go." He continued: "If the client is important enough geostrategically or one they want to cultivate in the long run, they will continue lending to them, despite long histories of corruption. They continue forcing loans down that pipe." The newspaper listed Bangladesh as one of the highly corrupt clients still receiving loans from the World Bank. RK
RUSSIAN SINGER-PARLIAMENTARIAN DECLARED PERSONA NON GRATA.
The Latvian Foreign Ministry declared Russian Duma member Iosef Kobzon persona non grata, according to media reports on 4 July. Latvian Interior Minister Maris Gulbis reportedly signed an order blacklisting Kobzon on 20 May. The reason given was that Kobzon posed a "threat to Latvian national security." Kobzon told "Vesti segodnya" of 8 July that the ban humiliated "all of Russia and all Russian compatriots in Latvia" and will negatively affect Russian-Latvian relations. He told the Russian-language Latvian newspaper that the action came in response to his participation in a 9 May Victory Day performance organized by the Russian Embassy in Latvia and his criticism of Latvia's treatment of Russian veterans and of plans to make Latvian the primary language of instruction in schools (see "RFE/RL Newsline," 12 May 2003). Kobzon, a member of the Russian Duma who is therefore immune from prosecution, has been characterized as the "Godfather of the Russian Mafia" by former FBI officials quoted in the book "The Red Mafia" by Robert Friedman. Kobzon is a popular Russian singer from the Soviet era who has been suspected of connections to numerous criminal enterprises in Russia. Kobzon is banned from traveling to the United States and has asked that a committee of Russian notables be formed to appeal this ruling. In early 2003, he hosted a television special celebrating the "Year of Russia in Ukraine" that was sponsored by Lyudmila Kuchma, the wife of the Ukrainian president. After this special presentation, a bill was proposed in the Donetsk city council in Ukraine to erect a monument to Kobzon in the city square. The bill was sponsored by Yefrem Zviahilsky, the former acting prime minister of Ukraine who fled the country to Israel after being accused of stealing $22 million. Zviahilsky returned to Kyiv after three years and resumed his position atop the Zasiadko coal mine. He has not faced prosecution on the earlier charges of theft of government funds, and is presently a member of parliament and as such is immune from prosecution. The bill to build a monument to Kobzon has been tabled for future consideration. RK