Committee for Russian Economic Freedom

Mikhail Khodorkovsky

In a piece published in TIME magazine in time for Vladimir Putin’s inauguration, jailed former Yukos chief Mikhail Khodorkovsky writes about the lack of rule of law in Russia and how individuals looking for justice there can’t count on the judicial system, which remains under Putin’s influence.

“Perhaps an individual judge may be biased,” he writes,

but the judicial system as a whole can’t ignore both the law and self-evident facts. Therein lies the error in my reasoning. [...] The main feature of the Putin regime, though, is its deceitfulness—from the very top, all the way down. Corruption, stealing from the treasury, persecution of political opponents—all these are consequences of the deep immorality of this government, a government that is more comfortable with smears and evasions than with transparency.

Khodorkovsky closes by saying that more and more, the Russian people are standing up to the regime and that this disobedience will soon bear fruit:

For the [younger generation's] sake, we are beginning to stand taller at last. We are beginning to stand taller in the deceitful courts and on the streets of our cities. Yes, we are still afraid, but now, even more than that, we’re ashamed in the presence of our children. And we can’t be made to bend anymore.

Read Khodorkovsky’s full column here.

ExxonMobil CEO Rex Tillerson (left) and Russian Prime Minister Putin (GETTY IMAGES)

Pavel Ivlev, founder and chairman of Committee for Russian Economic Freedom, released the following statement today on the Exxon-Rosneft alliance:

Through today’s agreement with Exxon, Rosneft has finally managed to give an aura of legitimacy to its theft of assets stolen from Yukos and its shareholders, including hundreds of American investors, as well as its CEO, Mikhail Khodorkovsky, who languishes in a Russian prison for crimes he did not commit.

Perhaps more than any other company, Exxon understands the pitfalls of conducting business in Russia, and while it is willing to assume the risks, the company must also seek opportunities to advocate for the pro-business reforms needed to make Russia a safer, freer place to invest and conduct business.

As it becomes a key partner to a Kremlin-run concern, Exxon can either play a formative role in pushing for much-needed rule of law protections in Russia or it will bear responsibility for abetting the Putin regime as it launders its ill-gotten gains and seeks to expand its personal wealth at the expense of the Russian people.

A report from Deutsche Bank saying former Yukos chief Mikhail Khodorkovsky has a 50-50 chance of early release is being cited as a primary cause for Monday’s bullish market in Russia, as the benchmark MICEX index rose more than 1.5 percent.

Mikhail Khodorkovsky

Deutsche Bank’s head of research and strategy for Russia Yaroslav Lissovolik wrote in a note that the odds of Khodorkovsky being granted parole are “significantly higher than any time in the past,” according to Bloomberg News.

“Releasing Khodorkovsky would boost Russian stocks five percent to 10 percent,” he added. The chief strategist at Troika Dialog also said he puts the odds of an early release for Khodorkovsky at 50-50.

Earlier this month Russia’s Presidential Council on Human Rights urged President Dmitry Medvedev to pardon Khodorkovsky ahead of Prime Minister Vladimir Putin’s inauguration, scheduled for May 7.

Medvedev did order Prosecutor General Yuri Chaika to review the guilty verdicts against Khodorkovsky. Chaika has until April 1 to present his findings.

Roland Nash

News that President Dmitry Medvedev has ordered Russia’s top prosecutor to review the conviction of jailed former Yukos CEO Mikhail Khodorkovsky has prompted some international investors to exhibit optimism over the Russian markets, reports Bloomberg News. The Financial Times called the review a “pleasant surprise” for investors.

Traders often cite the Khodorkovsky case as an example of the failure of Russia’s legal and judicial system. Roland Nash, chief investment strategist at Verno Capital in Moscow, told Bloomberg that a decision to free Khodorkovsky “may add 10 percent to the value of Russian stocks.”

In the last six months, the Russian benchmark MICEX index has risen only three percent, while the S&P 500 has climbed 15.5 percent.

Billed as “a place where unusual individuals who are capable of influencing the fate of Russia and the world can meet,” the annual Russia Forum wrapped up in Moscow over the weekend, with participating economists calling on the Putin regime to take immediate, concrete steps to encourage investment in Russia.

At a “Russia 2018” panel, New Economic School Rector Sergei Guriev said the Russian government could send an important signal to the investment community by releasing its most famous political prisoner:

To really prove that the Russian state is interested in a better business climate, first of all, they should release Khodorkovsky and fire all of the executives that are involved in the Magnitsky case. This will prove that the Russian government is interested in improving the investment climate.

Also on the panel with Guriev was former finance minister Alexei Kudrin, who called the current political system “obsolete” and in need of much reform in order to build a new economy. Kudrin applauded the fact that political competition has grown in the last few months. “That’s a good sign” for the economy down the road, he said.

Pavel Khodorkovsky

As rigged parliamentary elections provoked an outcry across the globe, Russian citizens have risen up to demand accountability from their leaders, writes Pavel Khodorkovsky, son of jailed former Yukos CEO Mikhail Khodorkovsky, in the World Policy Journal.

The protest movement is Russian through and through, Khodorkovsky explains, not provoked by an outside source. It’s a movement that he expects will only gain momentum as the nation heads toward a spring presidential election.

Read the full article here.

Reuters recently released an article outlining three key risks in Russia: the variable price of oil, political shake up in the Kremlin and further insurgency attacks. Though the world’s largest energy producer, Russia’s manufacturing, construction and retail industries continues to contract as domestic consumption and foreign investment continues to lag, increasing the economy’s dependence on oil prices for growth.

Prime Minister Vladimir Putin remains popular and the driver behind the co-governance team with President Dmitry Medvedev. Despite highlighting their differences and indicating Medvedev’s intentions of political and judicial reform, Reuters notes that Russian markets would rebound only if Putin remained in place. The maintenance of the status quo despite Russia’s world renown for government corruption and weak rule of law seems curious. With foreign investors, such as IKEA, Hermitage Capital, and now HBK investments scaling back or pulling out of Russia due to corruption and extortion, why would the markets value Russian companies more if the status quo remained?

And how does the continued expropriation of private business by government officials add to Russia’s economic capital?

The extraction of Russia’s economic and natural resources by the politically connected few leads to only self-enrichment. Perhaps this self-enrichment would be tolerable if the proceeds were reinvested in Russia and the Russian people, but this is rarely the case. What Russia needs is investment to update oil and pipeline infrastructure, capital to encourage innovation and a stronger rule of law to benefit all Russian people.

Russia’s most famous political prisoner, Mikhail Khodorkovsky began his spirited defense yesterday against his Kafka-esque second trial. The government charged Khodorkovsky and his business partner Platon Lebedev with stealing 2.5 billion barrels of YUKOS’s crude oil or a third of the United States’ entire annual consumption of oil.

The trial is also viewed domestically and abroad as a test of Medvedev’s commitment to ending “legal nihilism” and his power and control within the Kremlin. Medvedev even started a national anti-corruption drive this March. According the Associated Press,

The trial is considered a test of whether President Dmitry Medvedev, himself a lawyer, is serious about reforming Russia’s judicial system. In other cases, judges have come forward to complain they face political pressure.

Only time will tell if Medvedev makes good on his words.

It was the best of times. It was the worst of times.

On Thursday, January 14th the European Court of Human Rights (ECtHR) is hearing the case of YUKOS Oil Company v. Russian Federation, the first time in six years of litigation that both sides will meet face-to-face in a legal battle on the Russian authorities expropriation of YUKOS and its assets beginning in 2003.  Foreign policy and Russian officials have acknowledged that the imprisonment of YUKOS’s CEO Mikhail Khodorkovsky was due to political reasons stemming from his support of opposition parties.

Meanwhile, the Rusal continues on its IPO path, even as more doubts about the process have surfaced. Its controlling shareholder Oleg Deripaska continues to be linked to organized crime, was refused a visa to enter the United States on those grounds and has received millions in government money funnelled through Russian state-run Vnesheconombank (VEB), controlled by Prime Minister Vladimir Putin.

YUKOS’s Mikhail Khodorkovsky is being charged in a second round of trumped up charges while Rusal’s  Oleg Deripaska is being rewarded for his cooperation and collaboration with the Russian government, stating publicly that he would transfer Rusal back to the government at any time saying, “If the state says we need to give it up, we’ll give it up.”

Via the EU-Russia Centre, Der Welt published an article on why Mikhail Khodorkovsky remains significant to Russia’s economic development. According to the article “at least one third of the population expressed according to the survey Institute Levada-Center at the beginning of the conviction that people like Khodorkovsky could help with their know-how of the country in crisis.”

The full article translated below via Google Translate:

Khodorkovsky’s long shadow
Yukos was once an example to be established early on ethics and years later Vladimir Putin again lives in fear of the dead and a group jailed billionaire
Eduard Stein
December 2009, 04:00 Clock 14h

For some reason, Vladimir Putin, sensing a need for clarification. After six years of evasive answers and arcane information about the rise and fall of the government-imposed oil company Yukos was Russia’s most powerful man on television two weeks ago suddenly on the offensive. For years, curious person urged the former President and current Prime Minister, a plausible explanation. Vain. Finally, it was a dish that had sent the once-largest oil company in the country several years ago in the bankruptcy, said Putin and his top officials free of the responsibility: Finally, the court on a repeated sentence or the release would be the Mikhail Khodorkovsky, once Russia’s richest decide.

But it was still Putin himself, who forestalled suddenly in the course of his TV Question Time the court and in unexpected detail, commented on the case. What should spontaneously appear, therefore, ultimately came more through-composed. Do not go there about when to release for whom, “said the Prime Minister go there so that repetition of such economic crimes. They also maintained that the money from the auction of Yukos assets RULE in social housing has been set, “Putin said to the astonished spectators”. Then, to dare the legal tightrope: the ex-security chief of Yukos, Alexei Pitschugin, who has been convicted of three contract killings in 2007 to life imprisonment without the guilt, “has clearly acted in the interest of and on behalf of the owner.

Since Putin knows his opponent over the court, “said Mikhail Khodorkovsky, who himself was never accused of murder, from prison. You may still call upon the Premier to give evidence.

In seven days on the beginning of the Causa Yukos, the topic is thus again a household word. For years, the Russian authorities had hoped that the interest in his most prominent prisoner, who was once estimated at 15 billion U.S. dollars assets, more and more abated. And in the end perhaps totally dies. Too much the case had tarnished the image of the rulers and the country already. No other matter beyond the Chechen war had made the perceptive world opinion against Russia’s development under Putin. No subject had clearly signaled observers abroad that began with Putin after a decade of attempts in a market economy and democracy in a new era of statism and the authoritarian power vertical in Russia.

None other than 25 October 2003 was so obvious. Early in the morning landed on that day a Russian Tupoljew with Khodorkovsky aboard in the Siberian city of Novosibirsk. A few minutes later, the domestic intelligence service FSB special forces stormed the plane. “When I saw the siege was everything to me clearly,” to the then forty-year multi-billionaire said.

Already months before a string of incidents had indicated that was the most modern and most efficient oil company in the country with his boss and major shareholder in the crosshairs of investigators. What followed after the arrest, was an unprecedented geheimdienstgeschulten tug of war between the Kremlin and the relentless head of a mega company with 105,00 employees. At the end Khodorkovsky was convicted of fraud and tax evasion in 2005 with eight years imprisonment in the remotest Siberia. Subsequently, Yukos was filleted and mostly incorporated into the state oil company Rosneft, which rose to the market leader.

Since the spring of this year, Khodorkovsky is in Moscow again in court. Shake about the new indictment not only Putin’s critics around: the tycoon is the whole Yukos flow have been stolen. Previously he had been convicted solely because of tax evasion for the Yukos oil. Now the prosecutor has accused him of having illegally sold oil worth 20 billion euros. In extreme cases, this latest charge threaten to bring more than 20 years in prison.

One should remember the Mafia boss Al Capone, the “30 year old was formally sentenced in the U.S. for tax fraud – but in reality for all crimes he committed,” Putin initiated at the end of November in France. His answers to answer the questions about Khodorkovsky was drastic. He likened his rival on this occasion with the U.S. billion fraudster Bernard Madoff, who was sentenced to 150 years in prison. Nobody has felt the injustice and “even a beep given by itself,” complained Vladimir Putin. Why just the other Causa Khodorkovsky with a measure would be measured?

Because it was politically motivated to be Khodorkovsky’s lawyers never tires of stressing. That’s what Putin himself admitted behind closed doors, said a few months ago, none other than Mikhail Kasyanov, the beginning of the affair, Prime Minister under Putin. The former president had echauffiert about the fact that Khodorkovsky without permission of the Kremlin’s next Liberal parties also began to sponsor the Communists,’ said Kasyanov. Immediately after his assumption of office, Putin had called all the oligarchs to abide by political non-interference. All other tycoons, who like Khodorkovsky, seized during the privatizations of the 90s to questionable nature and at bargain prices, huge fortunes under the nail, and great power within the state itself, had understood Putin’s message – and Khodorkovsky was warned. The wealth had gone to his head and caused a feeling of integrity, he would tell later companions. “Was Chodor,” as his intimates call him, just a strong person with principles to keep his followers against it.

Khodorkovsky has indeed has strong international support. Unlike court proceedings, the lobbying machine of the volatile Yukos billionaire runs very fast. Together with lawyers, they instigated in an information war with the Kremlin, which they have won very early on. In early December, they also achieved a real part of success: An international arbitration tribunal in The Hague ordered former Yukos shareholders to legal action against the Russian government because it had allowed, despite binding to the International Energy Charter, the expropriation of the Group. As the claim will be circulated to the shareholders of 100 billion U.S. dollars.

“In the end, the European Court, but not 10,000 dollars compensation claim,” warns Alexei Makarkin of the Moscow Center for Political Technologies to realism in a new information war. But also includes Makarkin – such as Khodorkovsky’s supporters – not that Putin’s attacks against the detainee associated with the decision of the Court of Holland and the prime minister had once built a defensive line.

For just as likely, but observers think that is on the rise in the Russian government panic because the politicians are afraid because of the absurdity of the charge in the current second trial in Moscow for an acquittal.

Domestically, such a defeat would have to get over, however. The nation does not feel any great sympathy for Khodorkovsky. But at least one third of the population expressed according to the survey by the Institute Levada-Center at the beginning of the conviction, that people think Khodorkovsky could help with their know-how of the country in crisis. “If Khodorkovsky was set free, he would become perhaps less economically, but socially active,” says Sergei Guriev, rector of New Economic School in Moscow: “As a moral authority he could collect a lot of people around.”

An acquittal would have still another effect: When would this year have a pregnant Yukos lawyer suffering from AIDS and the former deputy leader of the group have been released from prison, the verdict further evidence of potential investors that the new president, Dmitry Medvedev, with the modernization seriously. “It would be a sign that the country does not drift to a halt,” says Guriev.

But that when it comes to power, the investment climate for the governance of secondary, Makarkin said: “Being a strong character Khodorkovsky is ready to fight. Putin has made clear with his recent statements that he did not want to see him in freedom.”

From the Khodorkovsky and Lebedev Communications Center

On October 28, 2009, Mikhail Khodorkovsky’s defense counsel served a federal subpoena on former PricewaterhouseCoopers (PWC) audit partner Douglas R. Miller, requiring the accountant to provide sworn testimony about his work in Moscow on behalf of the expropriated oil giant and the various legal proceedings initiated by the Russian authorities concerning PWC’s work for Yukos.

But on December 11, 2009, the Russian Prosecution attempted to disrupt Miller’s deposition. Its representatives filed a motion with the Khamovnichesky Court in which they asked the court to issue a decision finding Miller’s scheduled deposition inadmissible as evidence. The court found the motion did not comply with Russian law and denied it.

Miller was the lead partner on the Yukos account in Moscow for PWC, Yukos’ longtime outside auditor and consultant. At the end of 2006, the Russian authorities started a criminal investigation, which is ongoing, targeting PWC and its employees, including Miller, in connection with alleged illegal operating activities and tax evasion in Russia. As a result of increasing pressure on PWC by Russian authorities, in a manner clearly designed to undermine the reliability of the Yukos audited financial statements and to secure incriminating testimony from the management and employees of PWC against Khodorkovsky and Lebedev, PWC subsequently withdrew 10 years of audits of the Yukos financial statements. Miller signed one of the letters officially withdrawing PWC’s audits.

The subpoena already has provided dividends to the defense and established the Russian Prosecution’s further violation of Khodorkovsky and Lebedev’s rights. Miller has produced documents which reveal the prosecution selectively submitted records into the case materials and intentionally withheld documents containing exculpatory evidence.