Cold Hand Of KGB Haunts Oil-Rich Wasteland

Even by the desolate standards of Siberia, Nefteyugansk is a forbidding place. Last winter temperatures sank as low as minus 58 Celsius.

Summer brings with it a sapping humidity, melting the ice and turning the area into a vast, mosquito-infested swamp. No one in his right mind would want to live in Nefteyugansk. Indeed, until the 1970s, no one apart from the local Khanti people did.

Yet this stretch of Siberian marsh is now perhaps Russia's most valuable piece of real estate. Sitting on some of the planet's largest oil reserves, it has also become central to President Vladimir Putin's plans to turn Russia into a global power once more.

Next month western investors will be able share in the riches lying beneath Nefteyugansk's wasteland when a minority stake in the state-owned oil company, Rosneft, is floated on the London Stock Exchange. Valued at between £5.4 billion and £10.8 billion, it could be one of the largest share offers in history. It is also one of the most controversial.

Rosneft has begun a public relations exercise ahead of the flotation, flying journalists to the oil fields around Nefteyugansk in private jets and putting on impressive 3-D displays to demonstrate the company's solidity.

Executives in hard hats lead tours, boasting about everything from the company's green credentials to the swimming pool built for the local community and the treatment of its staff.

"We give them three meals a day; breakfast, lunch and dinner," said Irina Kirkun, the public relations manager. But tricky questions are avoided. Look beneath the fresh coats of paint that deck the outhouses, rigs and vehicles that stretch across the oil fields and a group of letters is often still distinguishable. They spell the word "Yukos".

Ever since a cocksure young entrepreneur named Mikhail Khodorkovsky acquired the oil giant for a knockdown price in one of the dubious auctions of state assets that characterised the 1990s, the tale of Yukos has been a sordid one.

Ownership turned Khodorkovsky into Russia's richest man. But he offended Mr Putin by funding the opposition in breach of a reported deal with the Kremlin allowing oligarchs to keep their money if they stayed out of politics.

Retribution, orchestrated by a clique of Mr Putin's ex-KGB cronies in the Kremlin, was swift. Khodorkovsky was arrested on tax fraud charges in 2003. He is now serving an eight-year sentence in a remote penal colony.

Last month his face was slashed by a knife-wielding cell mate, an attack his lawyers say was orchestrated by Kremlin officials who still fear Khodorkovsky could emerge as a presidential challenger. "He will never leave prison," said a former senior Yukos colleague. "He'll die there, or they'll drive him crazy or they'll cripple him and say he develop a disability."

But the Kremlin's assault did not stop with Khodorkovsky. Instead of using the opportunity to reform the excesses of the 1990s, it embarked on a remorseless campaign to crush Yukos.

It was forcibly auctioned off in December 2004 to cover $27.5 billion in alleged back tax. The only bidder was a mysterious outfit registered to a provincial grocery shop, which promptly sold itself to Rosneft.

The Kremlin suddenly had control of perhaps Russia's most attractive oil company, fulfilling Mr Putin's dream of reasserting state control over the energy sector while simultaneously enriching the ex-KGB hardliners in his inner circle. Mr Putin's former economics adviser termed the auction "the swindle of the year". Rosneft has larger reserves than the US oil firm Exxon-Mobil. Russia is the world's second largest oil exporter and could soon overtake Saudi Arabia.

The Foreign Office is understood to have warned the London Stock Exchange that its reputation could suffer with the flotation, with critics charging that it is essentially peddling stolen goods.

"Rosneft is essentially controlled by the old KGB," said one former Yukos executive. "Do you really want people like this as your partners?"

There is far more to the Mikhail Khodorkovsky story than this article than The Telegraph is telling. The man is not an innocent angel as the American and European public have been lead to believe.

Prior to the bidding for Yukos Khodorkovsky set up a dummy corporation for the express purpose of bidding on Yukos. He then bid $200,000 of his own money for the firm. His thugs then murdered and intimidated others to keep them out of the bidding. After the bidding was closed he dissolved the dummy corporation, and won the bidding for Yukos for the $200k, which he never paid.

The Russian public is very aware of how Khodorkovsky and the other oligarchs obtained their riches, and have for some time been demanding the government take action. When Putin was elected President he called the oligarchs in and promised to leave them alone on two conditions; 1) they had to stay out of politics 2) they had to pay their taxes. They agreeded to these terms.

Khodorkovsky broke his promise, and made the decision to run for president. Everyone is aware Russian businessmen keep two sets of books to avoid taxes, and Putin knew exactly where to look.

Here is the accompanying article in the Telegraph. Makes your point that Khodorkovsky was no angel, but wonders why other oligarchs were not hunted down too.

Keep quiet and watch your back... it's just like the old days
(Filed: 22/06/2006)

It almost feels like being back in Soviet times. Meetings take place on park benches to avoid the bugs planted by the FSB, the intelligence service that succeeded the KGB.

Throughout interviews, people glance around furtively to see who is watching, dropping their voices when anyone comes past.

The Kremlin has got its man. Mikhail Khodorkovsky is languishing in a penal colony, serving an eight-year sentence for fraud. But the relentless campaign of intimidation against mid-ranking former and current executives at the tycoon's shattered oil company continues in the ruthless manner Vladmir Putin's government reserves for those who cross it. Since the oligarch's arrest in 2003, security forces have carried out more than 2,000 raids on the homes and offices of Yukos employees. Often they come late at night, wearing balaclavas and accompanied by Alsatians, hammering on doors before bursting in.

"For the first time since Stalin there are thousands of people in Russia who are terrified of the sound of the knock on the door," says a former Yukos accountant.

"I think it's even more scary now," another says. "Before if you were a dissident and the KGB knocked on your door you could at least have expected it. Today you don't know if you are a target or not."

Most Russians, and even some ex-Yukos employees, are happy to see Khodorkovsky in jail, even if justice seems to have been selective. While he sits in jail, other oligarchs who made their fortunes just as questionably but did not oppose the Kremlin relax on the world's biggest yachts.

But the harassment of other Yukos officials makes it appear that Khodorkovsky was not the sole target of a political vendetta.

Here is the accompanying article in the Telegraph. Makes your point that Khodorkovsky was no angel, but wonders why other oligarchs were not hunted down too.

Khodorkovsky was not the only oligarch to get in trouble with the government. Boris Berezovsky was every bit as corrupt as Khodorkovsky, but sought and gained asylum in Britain to avoid prosecution.

Berezovsky's created a video in 2000 where he blames Putin and the FSB for blowing up apartment buildings to justify the Chechen War. There is a major problem concerning the incident at Ryzan, which he overlooked. The FSB is accused of setting up a bomb composed of hexagon, with a shotgun shell as a detonator. Somebody should have told Berezovsky you can fire shotgun shells into hexagon all day long, and it will not explode.

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