Originally created 12/29/04

Former Yukos chief blasts Kremlin from prison

MOSCOW - Mikhail Khodorkovsky, formerly Russia's richest man, accused the Kremlin of stealing his Yukos oil empire by manipulating the law in a letter from prison published Tuesday.

Yukos founder Khodorkovsky, who has been in jail for more than a year on fraud and tax charges, also assailed President Vladimir Putin's efforts to strengthen government controls in Russia. He warned the Kremlin's moves to end the election of regional governors and limit economic competition and free speech would ruin the nation.

The letter came about a week after the company's most important production unit was bought by a state-owned firm in a series of secretive maneuvers.

The Yukos subsidiary Yuganskneftegaz, which produced 60 percent of the parent company's output, was sold Dec. 19 to a shell company registered to the address of a bar in a provincial Russian town for $9.3 billion, half of what foreign auditors said it was worth. The Rosneft oil company, in which Putin's deputy chief of staff serves as board chairman, then covertly purchased the shell company.

In an apparent reference to the sale of the Yukos subsidiary, Khodorkovsky said in his letter this "was the most senseless and destructive event in the economic sphere since President Vladimir Putin has taken helm." His letter was published in a leading Russian business daily, Vedomosti, and also on Khodorkovsky's personal Web site.

"The destruction of Yukos is nearing completion," he wrote.

Putin defended the takeover as an effort by the state to protect its interests. But his own economic adviser, Andrei Illarionov, was quoted in Russian news reports as saying it was the "fraud of the year."

Khodorkovsky accused the state of shamelessly trampling on legal norms to wrest Yukos from its former owners. He called the government's $28 billion back tax claim, against which the Yukos' unit was sold, a "bad joke," saying it exceeded the company's earnings.

Yuganskneftegaz, which produces more than 10 percent of Russia's oil, or 1 percent of world output, was sold against its parent company's crippling $28 billion back tax bill. The sale was the most disputed corporate auction in Russia's history and it left what was once the nation's most transparent company in ruins, and the government in control of one of its largest oil producers.

Khodorkovsky, who was No. 16 on Forbes magazine's list of the world's richest people with an estimated fortune of $15 billion, said his personal wealth "will soon come to zero" but added that losing it wasn't "unbearably painful."

He is seen variously as either a political prisoner targeted on trumped-up charges for funding opposition parties, or a crooked tycoon who bought Yukos for a song in rigged auctions of the 1990s before funneling its revenues through offshore schemes and pocketing billions.

The latest letter contrasted sharply with others Khodorkovsky published from prison earlier this year - before the sale of the Yukos subsidiary - in which he apologized for his actions and praised Putin.

"The Yukos case isn't a conflict between business and state, but a politically and commercially motivated attack launched by one business, represented by officials, against another," Khodorkovsky wrote in the letter.

Some observers say the government's investigation of Yukos and Khodorkovsky is a Kremlin power play aimed at neutralizing a political opponent and reclaiming influence in the crucial oil sector.

Putin has cast the 18-month crackdown on Yukos as an effort to fight corruption and shady bookkeeping, but it has been widely seen as a vendetta for Khodorkovsky's perceived political ambitions, including his funding of parties in opposition to the Kremlin.

Khodorkovsky again dismissed the fraud and tax evasion charges against him, but said he was told authorities want to keep him in prison for five years or more "because they fear I would try to take revenge."

But he said he would rather "breathe fresh spring air, play with children... and read good books." Khodorkovsky has twin 5-year-old sons.


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