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May 16, 2005
Focus on Russia, Mon., May 16, 2005, 9:05 AM
Khodorkovsky's Defense Team Says Guilty Verdict Indicated
MOSCOW (AP) -- By Alex Nicholson, Associated Press Writer
"A judge began reading the verdict Monday in the politically charged trial of Mikhail Khodorkovsky -- the most closely watched courtroom proceedings of post-Soviet Russia -- and the oil tycoon's defense team said the form of the reading indicated he would be found guilty. "Judging by the fact that the judge is reading the indictment, it will be a guilty verdict," Robert Amsterdam, a Canadian member of Khodorkovsky's defense team, was quoted as saying by the news agency Interfax.
"The sentence for Khodorkovsky is awaited by practically all the citizens of the country. Without exaggeration, it is a signal event that will determine the direction of the country's development for many years to come," the Izvestia daily commented.
The sentence had originally been scheduled for April 27, but was postponed at the last moment. The delay was widely believed to be due to the fact that Putin was soon due to host dozens of foreign leaders in Moscow for VE Day celebrations and the Kremlin did not want any unpleasant questions about the jailed tycoon to spoil its pomp-filled celebration.
Khodorkovsky and (co-defendant Platon) Lebedev, whose verdict also was expected Monday, are charged with rigging a privatization auction in 1994, stripping profits from a major fertilizer component maker, illegally using onshore tax havens to slash Yukos' tax bills and dodging millions in personal income tax.
Khodorkovsky was one of the so-called oligarchs who made vast fortunes in the 1990s through often-murky deals stemming from the privatization of state enterprises. But he later tried to shed his robber-baron image by turning Yukos into what was regarded as Russia's best-run major company and by starting a foundation to promote civil-society initiatives.
Khodorkovsky was arrested in October 2003 in a dramatic raid on his jet while it sat on the tarmac of a Siberian airport. While he has been in custody, Yukos has been hit with huge claims for back taxes.
Yukos was stripped of its giant Siberian production unit Yuganskneftegaz to pay part of its tax bills. The company that once had a market value of $40 billion is now valued at just $2 billion; badly burnt investors expect it to fall to zero."
Khodorkovsky, who headed the Yukos oil company, is charged with fraud and tax evasion. In my view, this is a sovereign matter. Unless and until foreign observers understand the massive consequences, and the PR machinery involved on both sides of this matter, I think it is inappropriate for them to comment.
Judge Irina Kolesnikova will likely complete the reading of verdicts to the seven charges on Tuesday. There will likely be a reaction in the capital market " pro or con " to the court result.
Rather than spend time reading PR, I'll be watching the Moscow Times Index and the Russia Trading System for their acceptance of this decision. I expect it to be positive, if only because traders everywhere do not like uncertainty.
If traders happen to react negatively to the verdict itself " believing as many do that Khodorkovsky's "arrest and trial is a Kremlin-directed campaign to undermine his political clout and punish him for funding opposition parties" " then Russian capital markets will suffer accordingly.
In my own commentary about the Russian market, I have been more than complimentary. I see the country as having enormous economic potential, relative on a population basis to that of China.
If you click on the International Equities link on the top banner, and read down some, you will find that commentary.
I also started a series of articles on Russia that I stopped in mid-stream a couple months ago because I didn't want to be recommending Russian stocks in a bearish equity market environment as I saw it at that time. But, suffice it to say, that there are several Russian companies on the Cara Global Best 100 Companies list.
Like many of you, I might not like the political history to some Russian companies like Norilsk Nickel, but as high-quality equities they are legitimate trading vehicles.
Serious traders will scout out the world for these opportunities, and leave the political PR spin to be considered by others.
P.S., In the past few minutes, Reuters announced that Khodorkovsky was found guilty on the first four of four charges. He still faces verdicts on a further three charges. It's not so long ago, the man would not have had a trial, but would have been executed. Russia is changing indeed.
Posted by Posted by Bill Cara on May 16, 2005 09:04:16 AM | Category: Russia