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Cover Story

The Yukos-Khodorkovsky Affair
John Bonar

Mikhail Khodarkovsky, Russias one-time richest man who socialized with the likes of Bill Gates, has been languishing in a remote Far Eastern jail since October 2005, sentenced for tax evasion. At the time of his arrest, shock waves ran through the investment community and some 30% was wiped off the value of the Russian stock exchange. These concerns have been largely dissipated as more and more people have come to realize that while there may have been deficiencies in the legal process, the former oligarch and main shareholder in the Menatep Group which in turn owned Yukos, is exactly where he deserves to be.

President Putin told German TV, It is hard to imagine that in the Federal Republic of Germany, in three or four years, people could amass many billions of dollars of personal funds. If the court decided that these assets were obtained by illegal means and made a decision, then we abide by the courts decision. And this has not stopped the inflow of foreign investments into our economy.

Earlier, he told French TV, Even those who have amassed billion-dollar fortunes in the space of just five or six years have to observe the law. The state is not a nanny. The state is above all an instrument of enforcement to ensure equal conditions for all citizens, equal chances to develop and achieve success. The clan, the so-called oligarchs, is, as we understand it, a group of people who used the economic and legal transition period that our country went through to bypass the interests of our country and the majority of its citizens in order to amass huge fortunes through illegal means. If this can be proven by a court of law, then they must bear responsibility for their actions.

Eric Kraus, the outspoken author of the Truth and Beauty (and Russian Finance) newsletter is far more blunt. He says, The Menatep boys were murderous thugs, bent on absolute domination, and were a real threat to the nascent Russian recovery (after the 1998 default). Anyone familiar with how Yukos dealt with obstructive mayors, business rivals, or the owners of any oil property it happened to covet, will immediately see our point. Certain business rivals of Khodorkovsky had life spans statistically shorter than their peer group...

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