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Russian shares fall after oil firm seizure

CHRIS MARKS DEPUTY FOREIGN EDITOR

THE Russian stock exchange slumped yesterday, after judicial authorities seized control of the giant Yukos oil firm in a dramatic escalation of the conflict between the Kremlin and big business.

The decision to freeze the majority of shares in the company came as Vladimir Putin, the Russian president, met leading investors in an attempt to calm financial and political nerves in the wake of the arrest of Mikhail Khodorkovsky, the Yukos chief executive. He was arrested at gunpoint by special forces operatives at a Siberian airport on Saturday, jailed and charged with fraud and tax evasion.

Russia’s general prosecutor’s office confirmed last night that it had seized shares from two companies - one registered on the Isle of Man and the other on Cyprus.

Alexander Shadrin, a Yukos spokesman, said: "I can confirm that a controlling stake of 61 per cent of shares has been seized, although these shares still retain voting and dividend rights."

The seizure came hours after Yukos had offered shareholders a record $2 billion (£1.2 billion) dividend in an effort to steady the beleaguered firm.

Yukos shares closed almost 12 per cent down after the seizure, and the Russian RTS index fell 8.14 per cent. Yukos shares have fallen more than 30 per cent from their all-time high of $16 on 17 October.

Analysts say the drive against the company has been initiated by Kremlin "hawks" seeking to strengthen their influence over Mr Putin, reassert state authority over businesses and exert control over elections.

Platon Lebedev, a major Yukos shareholder, is also behind bars, charged with theft linked to a 1994 privatisation deal.

Prosecutors are seeking the annulment of the election to parliament of Vasily Shakhnovsky, who has a 4.5 per cent share in the company, and want to end his immunity to charges of tax evasion.

Khodorkovsky, one of the "oligarchs" who, like Roman Abramovich, the oil magnate who bought Chelsea Football Club, made their fortunes in the post-Soviet sell-off of state assets, supports liberal opponents of Mr Putin in December’s parliamentary polls. Mr Putin is seeking re-election in a separate poll in March.

The massive dividend announced by the firm yesterday would benefit holders of shares before 25 September, including Khodorkovsky and Lebedev.

"The dividend exceeds market expectations, which may reflect a desire by Yukos’s core shareholders to raise additional cash from the company at a time of heightened political uncertainty," an analyst said.

"The payout simply shows that either Yukos will have a bigger than expected cash flow in the third quarter, or it will have a higher debt, when it merges with Sibneft," said Oleg Maximov, from the Troika Dialog brokerage, referring to the pending tie-up with a smaller oil rival.

In another sign of the Kremlin hawks’ ascendancy, the Russian media reported the resignation of Mr Putin’s chief of staff, Alexander Voloshin, a leader of a rival pro-business camp.

Mr Voloshin and like-minded officials left over from the Boris Yeltsin era are viewed as tainted by links to the oligarchs.

The choice of a successor to Mr Voloshin, who holds one of the most powerful jobs in the Kremlin, will be a key signal of Mr Putin’s commitment to reforms.

A choice of one of the many administration officials linked to the state security apparatus is likely to be taken as a bad sign for reform prospects.

Khodorkovsky’s jailing has sent Russian stocks down amid fears the Kremlin could launch a broad revision of the privatisation of the 1990s, in which tycoons snapped up prized chunks of state assets at giveaway prices in dubious auctions.

Stock traders apparently saw yesterday’s seizure as confirmation of those fears. The move was the first in the probe against property rather than individuals.

"This unlawful approach to the seizure of assets of persons allegedly guilty of some trumped-up charges of inflicting damage will soon allow blocks of flats and individual flats to be seized," said Mr Shadrin.

The transfer of state-owned flats to their residents was the only part of the post-Soviet privatisation programme which was widely accepted by the Russian public.