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Oil tycoon delaing with exxon arrested

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Posted on Sat, Oct. 25, 2003

Head of Russian oil company arrested
By Mark McDonald
Knight Ridder Newspapers

MOSCOW - Russia's wealthiest tycoon was arrested in Siberia on Saturday after secret police wearing black ski masks stormed aboard his airplane in a pre-dawn raid.

Mikhail Khodorkovsky, 40, the head of Yukos, Russia's largest oil company, was taken into custody during a refueling stop in the Siberian city of Novosibirsk. Agents from the Federal Security Service, or FSB, the successor to the KGB, used trucks and buses to block his plane, and then rushed aboard. One witness said the agents were shouting, "FSB! Drop your weapons or we'll shoot!"

Khodorkovsky did not resist and was taken to Moscow and jailed Saturday night. He was charged with seven criminal counts, including fraud, forgery, embezzlement and tax evasion. Prosecutors said the indictment papers ran to 50 pages, and more charges may be filed soon.

The heavy-handed arrest of such a high-profile, pro-Western businessman is sure to undermine the investment climate in Russia, analysts said. They also expect a deflation in the high-flying stock market come Monday.

On Saturday, the political atmosphere in the capital was already highly charged as analysts immediately questioned the timing of the Khodorkovsky arrest. Parliamentary elections are just six weeks away, and the tycoon openly finances two of the political parties that are challenging the Kremlin-backed United Russia.

A police spokeswoman said the arrest took place because Khodorkovsky had defied a Friday summons to come in for questioning. There was no immediate indication that the oil magnate, whose personal wealth is said to approach $10 billion, was fleeing the country when he was detained. One associate said he was on a domestic flight at the time.

The dramatic arrest is the latest in a series of highly visible moves by the government against Yukos, which merged three weeks ago with rival Sibneft to become the world's fourth-largest oil producer. Since then, Khodorkovsky has been in serious talks with ExxonMobil, and financial analysts in Moscow believe he is offering a 25 percent stake in YukosSibneft for $13 billion.

It was not immediately clear how the arrest might affect the deal with ExxonMobil.

The government's five-month campaign against Yukos has included late-night police raids, seizures of company computers and the detention of senior corporate officials. Khodorkovsky's close friend and personal money manager, billionaire Platon Lebedev, has been in prison on fraud charges since July.

In a statement issued late Saturday night, Yukos condemned "the brutal coercion" of the arrest, calling it politically motivated and "humiliating for the entire Russian law-enforcement system."

Yukos also said its day-to-day operations would be unaffected. In an earlier interview with Knight Ridder, Khodorkovsky said his firm had an emergency business plan in case he was killed, abducted or arrested.

Last week, police raided a public relations firm that works for Yabloko, the opposition party. In that raid, agents seized six computer servers and $700,000 in cash. Officials with the firm said the seizures had paralyzed their work for Yabloko.

"We're concerned that all this is taking place at the peak of the election campaign," said Alexei Melnikov, a member of parliament from Yabloko. He said it seemed clear "these steps are intended to hamper our election campaign."

If nothing else, Khodorkovsky seems to have violated a three-year armistice between the president and the super-rich oligarchs, that handful of shady young businessmen who made overnight fortunes by taking control of banks and valuable state-owned industries. Putin agreed to leave the businessmen alone as long as they stayed out of politics.

Communist Party leader Gennady Zyuganov said Khodorkovsky's arrest almost certainly stemmed from his political activities.

"When he didn't engage in anything but business, he was an ally of the powers that be," Zyuganov told the Interfax news agency. "But as soon as he declared political intentions he immediately became an opponent. The present-day leadership doesn't stand on ceremony with its opponents."


(c) 2003, Knight Ridder/Tribune Information Services.


ARCHIVE PHOTOS on KRT Direct (from KRT Photo Service, 202-383-6099): Khodorkovsky

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