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The Moscow Times, July 7, 2003

Head of Yukos: It's a Kremlin Struggle

By Simon Ostrovsky and Valeria Korchagina

A day after being questioned by prosecutors, Yukos CEO Mikhail Khodorkovsky said the fraud charges brought against his business associate and the pressure being put on the oil major 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," Khodorkovsky said late Saturday in Tomsk in an interview with TV-2 television. A transcript of the interview was posted on Ekho Moskvy radio's web site, 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."

Khodorkovsky described the arrest last week of Platon Lebedev, the head of Yukos parent company Group Menatep, as an attempt to force him into throwing his weight, and money, behind one of the factions.

"We are not the subjects in this battle, we are the objects: a chair, a table, Yukos."

Khodorkovsky, Russia's richest man, has been using his wealth to expand his political influence and try to shape the configuration of the next State Duma. He has been openly funding Yabloko and the Union of Right Forces, two liberal reformist parties that will be competing against pro-Kremlin United Russia in December parliamentary elections.

United Russia has strong support from within the presidential administration. But political observers say that one of the groups in the Kremlin is backing People's Party, which just recently broke with United Russia and announced it was going into the elections on its own. (See story below.)

Observers see this as a rivalry between the so-called Family, the holdovers from the Boris Yeltsin era, and the St. Petersburgers, men mainly from the security services who followed Putin into the Kremlin.

Khodorkovsky refused to say to which two groups he was referring.

The arrest of Lebedev has been seen as a message to Khodorkovsky to get out of politics, and in Saturday's interview he sounded glad to oblige.

"As an entrepreneur, I would not argue with the president of the country or, say, his administration if I was told that such and such a form of not purely commercial activity is not acceptable for the political leadership."

He also downplayed the importance of his political activities and stressed that business was what mattered to him most.

"Everybody has to play on his own field: economic entities on one, political entities on another," Khodorkovsky said. "If I wanted to be a dissident, then I would probably do that, instead of business."

In the radio interview, Khodorkovsky spoke carefully and cautiously.

Yabloko leader Grigory Yavlinsky, who spoke out publicly for the first time at a news conference on Friday, was much more critical of the Kremlin.

"This is a political purge ahead of the elections, to put pressure on the political opposition," he said, Interfax reported.

The goal is to stop Yukos' attempt "to become a politically independent and transparent company, operating according to international standards, and force it to be fully dependent on the state," Yavlinsky said.

Irina Khakamada, a leader of the Union of Right Forces, also said the case was politically motivated. Interviewed Friday on NTV television, she said it was "a demonstration to the oligarchs that they cannot interfere in politics."

Khodorkovsky and his No. 2, Leonid Nevzlin, were questioned separately at the Prosecutor General's Office on Friday.

Khodorkovsky, who spent two hours in the prosecutor's office, made only a vague statement when he emerged. "There were no questions about the business activities of the company," he told waiting reporters. "All the questions were about the issues that have already been described in the press."

Prosecutors spent much longer, about six hours, questioning Nevzlin, but he said he had no complaints. He said the questioning was done in accordance with the law and he was even allowed to have a break. Kommersant reported Saturday that he had had dinner in the prosecutors' cafeteria.

"I didn't expect to be arrested because I don't feel guilty of anything," said Nevzlin, who serves as rector of the Russian State Liberal Arts University. He refused to comment further, saying he had made a written pledge not to discuss the case.

As Khodorkovsky and Nevzlin were being questioned, investigators from the Prosecutor General's Office seized documents from the Moscow office of M-Reyestr, the company that keeps the records of Yukos, its subsidiaries and some subsidiaries of Gibraltar-registered Group Menatep, Interfax reported, citing law enforcement sources. Citing a source in M-Reyestr, Interfax said the investigators also seized the server for the company's computers, which contains information on more than 200 companies.

Lebedev, who was arrested Wednesday, is charged with defrauding the state of more than $280 million in 1994 in the privatization of a 20 percent stake in fertilizers producer Apatit. As of late last month, 84.1 percent of Apatit was held by a group that has been linked in news reports to Lebedev and Khodorkovsky.

At a hearing on Thursday, the Basmanny municipal court sanctioned the arrest and ordered Lebedev to remain in Lefortovo prison. A lawyer for Lebedev, Yevgeny Baru, told Kommersant that the defense team was notified only 1 1/2 hours before the start of the hearing and was unable to get there on time or win a delay. When the lawyers did arrive, they were not allowed into the courtroom, the report said. "We spent five hours outside the door," Baru was quoted as saying.

In the Ekho Moskvy interview, Khodorkovsky said the arrest of Lebedev broke an agreement reached between the oligarchs and Putin shortly after he was elected in 2000. In essence, the president agreed not to revisit the privatizations of the 1990s in return for the oligarchs keeping out of politics.

However, some forces within the Kremlin apparently think it is Khodorkovsky who broke the agreement.

Khodorkovsky warned that if privatizations are revisited, it is not just the oligarchs who would be vulnerable.

"If in 1994 you bought an apartment ... and since then [prices have gone up], and you take today's legislation and superimpose it on those times, then you or any other person could easily be accused of fraud, just because they want to.

"The danger is they are using the unclear legislation of that period to create these accusations.

"It doesn't matter whether you bought a company or an apartment, what matters is whether it makes sense to put pressure on you or not.

"If it takes a general to call me in [for questioning], then for an ordinary person, a lieutenant will be enough."

Earlier Saturday, opening a Yukos board meeting in Tomsk, Khodorkovsky tried to reassure the board, and by extension the market, that the case was not an attack on the company itself.

"For certain reasons, unconnected with company activity, they are pursuing a policy to clarify the legal standing [of shareholders]," he was quoted by Interfax as saying. "This concerns neither company management nor our business activities. This concerns separate shareholders of the company."

Deputy Prime Minister Viktor Khristenko on Friday expressed concern about the effect the uncertainty surrounding Yukos was having on the market.

"I would like to wish for more substantial arguments on both sides, so as to sort out the situation as quickly as possible," Khristenko said in televised remarks. "The quicker the legal side of the issue is resolved, the sooner the market will calm down."

In the two trading days after Lebedev's arrest, Yukos shares fell almost 9 percent, or about a $2.6 billion loss in market cap.

 

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YUKOS Case

The Moscow Times, July 7, 2003

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