Moscow holds harsh line on Yukos

Amid clashing street demonstrations and a plunging Russian stock market, the trial of oil billionaire Mikhail Khodorkovsky is dragging to a close.

Moscow's Meshchansky Court adjourned Tuesday with the reading of the 300-page verdict still incomplete. But there seems little doubt that the former chief of oil giant Yukos - who faced criminal charges of fraud, embezzlement, forgery, and tax evasion - will soon be headed for a labor camp.

"The sentence has not been handed down, but we consider it to be illegal," says Yury Schmidt, Mr. Khodorkovsky's defense lawyer. "In the text of the sentence that has already been read out, we see significant violations. The court has totally taken the side of the prosecutor."

Tuesday, the second day in a verdict reading that could take up to a week, chief judge Irina Kolesnikova made clear where the court is headed: "The case materials and witness testimonies prove Khodorkovsky's and [codefendant] Lebedev's guilt," the independent Interfax news agency quoted her as saying.

Police violently broke up a pro-Khodorkovsky rally near the courthouse Monday, arresting several people and allegedly beating up former chess grandmaster Garry Kasparov. Counter-demonstrators Tuesday waved Russian flags and a huge banner that read: "The Thief Must Go To Jail."

Experts say the case, which has rattled Russia's political stability and soured its international reputation, is likely to remain a contentious issue, especially if the tycoon receives the maximum sentence of 10 years. "The image of the state has suffered badly from this," says Igor Yurgins, vice president of the Russian Union of Industrialists and Entrepreneurs. "This may well turn out to be a Pyrrhic victory" for the Kremlin, he says.

Khodorkovsky and codefendant Platon Lebedev were arrested in mid-2003. Since then, the successful oil company they led, Yukos, has been battered to the brink of bankruptcy by back tax bills of $28 billion. Late last year, Yukos's most profitable unit, Yuganskneftegaz, was taken over by the state-owned oil firm Rosneft. Last week, Rosneft moved to take over Yukos's remaining assets. Shares of Yukos, once Russia's most profitable company, are currently worth less than 5 cents apiece.

Experts say the legal confusion and fears of arbitrary persecution whipped up by the "Yukos Affair" have caused economic growth to plunge, capital flight to soar, and foreign investors to depart.

"The atmosphere of fear has undermined the business climate in Russia," says Mikhail Delyagin, director of the independent Institute of Globalization Problems in Moscow. "What we have is robbery of business taking place under the cover of law and tax collection, and all Russians understand this."

In his final plea to the court last month, Khodorkovsky alleged that the criminal case against him was fabricated by high-level officials intent on stripping the assets of a successful private firm.

Khodorkovsky's lawyers complain that the international community has muted its criticism because Russia is a leading supplier of petroleum at a time of high oil prices. "The thirst for oil is greater than the thirst for justice in many Western countries," charges Robert Amsterdam, a defense lawyer for Yukos.

But for the Kremlin and many Russians, Khodorkovsky symbolizes everything that went wrong following the collapse of the USSR. "Most of the Russian public does not believe that the big wealth accumulated by some in the past decade is legitimate," says Gleb Pavlovsky, a Kremlin-connected analyst. "Russians want to live in a free country, not in a Yukos-owned country."

In the 1990s, a handful of influential businessmen acquired the state's crown jewels - oil firms, steel mills, and nickel mines - at low prices in rigged auctions.

Khodorkovsky picked up Yukos in a 1995 auction that was supervised by his own bank, Menatep, for just $350 million. The value of Yukos, which included about 17 percent of Russia's oil reserves - or some 12 billion barrels - soon ballooned to about $30 billion.

In 2004, Forbes Magazine identified Khodorkovsky as Russia's richest man, with a personal fortune of $15 billion. Most of that, based on his controlling stake in Yukos, has since evaporated.

Opinion polls show that most Russians have little sympathy for Khodorkovsky, who lived in relative modesty and kept his assets inside Russia. A survey last month by the independent Public Opinion Foundation found that only 20 percent of Russians believe a person can get rich without violating the law, while 69 percent thought it impossible.

Khodorkovsky, whose wife, Inna, and four children still live in the Moscow suburb of Zhukovka, has been pilloried in pro-Kremlin media for continuing to finance opposition parties, human rights organizations, and critical media outlets.

In his final testimony, Khodorkovsky alleged that his public deeds and drive to create a Western-style corporation were a key reason for his prosecution.

"I believe that openness and transparency are the only path to independence from corrupt officials and arbitrary bureaucracy," Khodorkovsky told the court. "I am proud of what I have done."