Yukos: Western darling and Kremlin pest

20th September 2011, Comments 0 comments

Yukos was Russia's biggest and fastest-growing oil company when its high-flying boss Mikhail Khodorkovsky was snatched off his private jet by state security agents in October 2003.

What followed was one of the quickest collapses in Russia's corporate history -- a controversial unravelling that made struggling state oil firm Rosneft, headed by an aide of Vladimir Putin, into the giant that it is today.

It also put Khodorkovsky -- once one of the country's most powerful men -- in prison and for many made Yukos into a byword for what can go wrong when a Russian business crosses the Kremlin's path.

"Those who constructed this criminal case against me and my colleagues simply wanted to get the most flourishing company with a market value of $40 billion for free," Khodorkovsky said this week from his prison cell.

"Everything else just served as a pretext for -- but not the true cause of -- the attack," the 48-year-old told Kommersant Vlast.

Tuesday's ruling from the European Court of Human Rights delayed a decision on the $98 billion in damages Yukos had sought from Russia while clearing the state of the "alleged intentional destruction" of the ambitious firm.

Yukos was initially a murky institution that like most early post-Soviet ventures fell into private hands on the cheap in closely-scripted auctions.

But Khodorkovsky differed from many others by making a quick bet on adopting Western practices after winning control of Yukos for what economists later said was probably one-twentieth of its worth.

The former Komsomol youth group member named a group of US executives to the Yukos board and hired a New York-based public relations consultancy while publishing annual reports according to global accounting standards.

His company was already responsible for about a fifth of Russia's oil production in the summer of 2003 when it agreed the terms of an alliance with its smaller rival Sibneft that would have taken its total to that of Kuwait.

And another planned tie-up with what was then known as TexacoChevron was about to make Yukos into a formidable force whose interests would be lobbied in Washington.

That meteoric expansion made Khodorkovsky into the richest of Russia's oligarchs and filled him with presidential ambitions that put him in direct conflict with Putin's Kremlin.

He openly sponsored opposition parties and lobbied his own projects while also complained of corruption during a famous summer 2003 roundtable between Putin and Russia's top tycoons.

Many analysts later called the fateful meeting as the beginning of the end for both Khodorkovsky and his firm.

Putin ended that session by dropping a seemingly offhand remark: businessmen should pay their taxes before criticising the state.

The oil tycoon's company was then presented with a $3.4 billion bill for back taxes for 2000 a handful of weeks later -- charges that were later expanded.

Yukos eventually filed for bankruptcy protection in a Houston court and won a judgement in 2004 barring the Russian state from forcefully selling its assets to cover alleged violations.

But the company's most prized asset was sold off later that year to Rosneft and Yukos was dissolved under Russian law in 2007.

Rosneft for its part is now the country's undisputed oil champion and owner of a brand new strategic alliance agreement with the US supermajor ExxonMobil.

Khodorkovsky meanwhile saw his prison sentence extended last year after Putin dropped another seemingly off-the-cuff remark about his arch-foe.

"I believe that a thief must be in prison," Putin said when asked to comment on Khodorkovsky's case in December.

A Moscow court prolonged Khodorkovsky's time in jail by six years -- later reduced to five -- that same month.

© 2011 AFP

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