Business: The future of Russian business; Putin versus the oligarchs

Date: 2015-10-07; view: 527.

The Economist. London: Aug 7, 2004.Vol.372, Iss. 8387; pg. 55

1.What is your understanding of the notion “oligarchy”? What does the assault on Yukos mean for Russian business, politics and power?

"IT FEELS like we're being toyed with – like a baby seal being batted back and forth by killer whales." Thus one Yukos employee describes the sensation inside the company that was once the alpha whale of the Russian oil industry, but is now gasping to stay afloat under a barrage of legal assaults. This week, while it became clearer that the firm could keep on pumping oil, less happily the tax ministry began looking for tax evasion in 2002 and 2003, to add to the nearly $7 billion it wants in back taxes for the previous two years. Last week prosecutors charged Leonid Nevzlin, one of Yukos's main shareholders, who now lives in Israel, with conspiracy to murder.

Foreign-investment analysts are feeling pretty seasick too. Since the attack on Yukos and its then boss, Mikhail Khodorkovsky, began over a year ago, many have assumed that the goal was to punish him for his political influence-peddling, and probably to separate him from Yukos, but to leave the firm undamaged and in private hands. Harsh on him, perhaps, but not bad for the economy, and not – as native Russian observers were more wont to say – an asset-grab by Kremlin cronies. Yet recent announcements hint at a new plan: to break Yukos up and sell it off at artificially low prices, with the main production subsidiary, Yuganskneftegaz, perhaps going to the state oil firm, Rosneft (whose new chairman, Igor Sechin, is one of President Vladimir Putin's closest aides). If that happens, says a gloomy Al Breach of Brunswick UBS, usually one of the most upbeat foreign analysts, "it would be hard not to conclude that the Kremlin's key motivations are personal power and wealth".

Yet the end for Yukos has not yet come and may not for a while. Bailiffs last week seemed to backtrack by giving Yukos another month to pay its $3.4 billion tax bill for 2000. This still seems impossible. But the move allows room for negotiations that are rumoured, yet again, to be on. Yet such talks will only decide what, if anything, Yukos's owners will get for the firm, and how long Mr Khodorkovsky and his business partner, Platon Lebedev, must sit in jail for alleged fraud and tax evasion. And the delay could just be to allow the more important, far murkier negotiations in the Kremlin over who gets the spoils.