Kremlin warns over Yukos verdict fallout

19th January 2011, Comments 0 comments

A top Kremlim aide on Wednesday admitted that investors would see a greater risk in putting their money in Russia following the new jail term handed to imprisoned tycoon Mikhail Khodorkovsky.

The unusually outspoken remarks by the Kremlin's top economic advisor Arkady Dvorkovich marked the first time that a top Russian official has admitted the verdict for the ex-Yukos chief could spark a negative investor fallout.

"I think there will be serious questions from a significant part of the international community and the assessment of the risks of working in Russia will increase," Dvorkovich said in an interview with online newspaper

His comments also came days after British energy giant BP signed a huge Arctic exploration accord with Russia's largest oil firm, state-controlled Rosneft, in one of the biggest international deals in its post-Soviet history.

The deal has proved hugely contentious abroad, partly because Rosneft was able to climb to its dominant position by acquiring major assets of the broken-up Yukos in controversial auctions organised by the state.

Dvorkovich said the case would be a major topic when President Dmitry Medvedev attends the World Economic Forum in Davos and gives a keynote speech to global economic policymakers at the end of the month.

"As for the losses in image and the attitude of investors, in a week in Davos we will see how all members of the Russian delegation are asked these questions and we will know the attitude of investors."

Khodorkovsky's lead lawyer Vadim Klyuvgant told the Interfax news agency that a revision of the risk outlook by investors in Russia "had already taken place" after the new verdict.

A Moscow court on December 30 sentenced Khodorkovsky to 14 years in jail after finding him guilty of money laundering and embezzlement after a trial condemned by the West as politically motivated.

He was already serving jail time from a sentence from an earlier conviction in 2005. Under the terms of the new verdict, Khodorkovsky will stay in jail until 2017.

His supporters have long alleged the magnate was jailed in political revenge for daring to finance opposition to strongman Vladimir Putin and the second trial rattled investors as proof of the perils of business in Russia.

Dvorkovich declined to give his view on the outcome of the trial, saying it was a judicial matter, but noted that the court's decision was not final.

"It's clear that all procedures have not been exhausted, there will be appeals and examinations in different courts. To say that the trial is completely over is wrong."

Dvorkovich, a fanatical chess player seen as one of the most fervent proponents of reform on the Medvedev team, also did not shy away from a swipe at the government of Putin.

He said while the premier's work had been "effective" over the last two years there were still many problems in Russia, "including with the investment climate".

"And of course the government bears its share of the responsibility for this and the premier has said this many times himself," he added.

Dvorkovich hailed the BP-Rosneft deal as an example of what should be normal practice in Russia and said it could prove to be one of the "star" transactions of 2011.

Under the terms of the deal, Rosneft will hold five per cent of BP's ordinary voting shares in exchange for approximately 9.5 per cent of Rosneft's shares.

"This is a completely logical step not just in the logic of exchanging assets in the energy sector but also in privatisation," he said.

© 2011 AFP

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