Russia market braces after oil magnate's arrest ( 2003-10-27 11:07) (Agencies)
Russia's financial community braced Monday for
sinking market prices and waited for a sign from President Vladimir
Putin after oil magnate Mikhail Khodorkovsky was arrested and held in a
Moscow jail.
Khodorkovsky, Russia's richest man and head of oil major YUKOS, was snatched
from a plane in Siberia Saturday, whisked to Moscow, charged with fraud and tax
evasion and ordered held pending further investigation.
Russia's richest man, the chief executive
of the oil giant YUKOS, Mikhail Khodorkovsky listens to journalists'
questions during his news conference in Moscow in this Oct. 20, 2003 file
photo. [Reuters]
Liberals, including some backed by Khodorkovsky against Putin's allies in
December's parliamentary elections, denounced the action. Some said only an
assurance from Putin on the future of Russian business would calm investors.
Market sources said Russia's biggest brokerages and market participants were
conferring to determine how best to avoid a dramatic drop in share prices after
the market opened Monday.
"Khodorkovsky's arrest is as serious as September 11 was for the United
States. So they are using the same procedure," said one source, referring to
meetings by market participants after the 2001 airliner attacks on New York and
Washington.
Some investors feared an early market jolt.
"There will be a dramatic stock decline, not just a correction," said Bulat
Karimov at Aton Brokerage. "The head of Russia's biggest public company is under
arrest and this company is responsible for 30 percent of market turnover."
Others saw longer-term damage.
Yevgeny Yasin, former economy minister and now head of the State Higher
Economy School, said the arrest "might not have a noticeable effect" on the
stock market's benchmark RTS index.
"Over time, it will hit our balance of payments, capital flight will
increase. It already has," he told Ekho Moskvy radio. "No agency will give us
another investment rating."
MOODY'S UPGRADE
That was a reference to Moody's Investor Service awarding Russia an
unprecedented investment grade this month, a move which boosted Russian shares
and the rouble.
Khodorkovsky heads Russia's biggest oil company, YukosSibneft, created by a
merger now under way of YUKOS with smaller rival Sibneft. U.S. oil majors Exxon
Mobil and Chevron Texaco are thought to be interested in purchasing a stake in
it.
He has been in cat-and-mouse confrontation with authorities for months. One
of YUKOS's major shareholders has been detained and charged and firms linked to
YUKOS have undergone searches.
But unlike other "oligarchs" who were close to Putin's predecessor Boris
Yeltsin, like media magnates Boris Berezovsky and Vladimir Gusinsky, he has
vowed to remain in Russia.
Putin, heavily favored to win a second term next year, has said nothing about
Khodorkovsky's detention. Cautious throughout the row, he has nonetheless said
economic crimes should be punished without measures like incarceration in most
cases.
Boris Nemtsov, head of the Union of Right-Wing Forces, one of two liberal
parties financed by Khodorkovsky, denounced the move against Khodorkovsky as an
"act of intimidation."
Anatoly Chubais, the head of Russia's power grid who oversaw the chaotic
privatizations of the 1990s, said there was great unease over the actions of law
enforcement agencies.
"This process is worsening before our very eyes," he told Ekho Moskvy.
"Nothing can be put right without the president."
A senior executive of Russia's top business lobby, in comments scant days
before Khodorkovsky was charged, said business wanted no part of long-term
conflict with authorities.
"I do not wish to see the dispute between prosecutors and YUKOS become an
endless, smoldering conflict like that pitting Israel against the Palestinians,"
said Igor Yurgens, deputy head of the Russian Union of Industrialists and
Entrepreneurs.
