Saturday, May 29, 2004

Power Precariously Balanced

The Russian oil firm YUKOS is fighting for its life. Its former CEO and largest shareholder, Mikhail Khodorkovsky, stands trial for fraud and tax evasion. YUKOS is facing a 3.4 billion dollar government imposed penalty, which would bankrupt the firm.

This is a case of abuse of power. The question is whether the abuser is YUKOS or the Russian government.

Khodorkovsky is a part of the Yeltsin oligarchy and he has political ambitions. With the kind of political backing Khodorkovsky could muster, he was deemed a threat to the Putin oligarchy - mostly comprised of former KGB types and businesses friendly to them.

There's a twist, however. Liquidation of YUKOS assets to cover its penalties puts several important assets of Russia's energy infrastructure on the open market. Energy is about the only thing keeping the Russian economy from imploding and the economy is directly tied to Putin being reelected. Will YUKOS become "de-privatized" for the benefit of Russia (read Putin's oligarchy)?


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