Investor Anxiety over Khodorkovsky’s Fate

Will Stewart at the Evening Standard points out that many foreign interests in Russia will be closely watching the handling of Mikhail Khodorkovsky’s parole request as an indication of the safety of doing business in the country:

Analysis: Anxious investors in Russia Will Stewart, Evening Standard Mikhail Khodorkovsky, the oligarch jailed under the then Russian President Vladimir Putin, has launched an official plea for parole. In what will be seen as a test of new President Dmitry Medvedev’s bid to make Russia more attractive to outside investors, Khodorkovsky’s defence formally asked that he be released on parole from his eight-year sentence. Khodorkovsky’s imprisonment, and a raft of further charges and curious refusals of parole, echo some of the treatment meted put to BP’s embattled joint venture in Russia, TNK-BP. In recent months, TNK-BP has also been beset by a string of dubious official interventions, implemented, it is believed by official friends of TNK-BP’s Russian partners. The Khodorkovsky case and BP’s travails, are the two most high-profile tests of Medvedev’s pledge to strengthen the rule of law in the country and rid Russia of undue interference from high-ranking officials. And, although he is trying to distance himself from Khodorkovsky’s case – as he is with the BP affair – the eyes of the world are on the new President to see how he deals with the problems.

For while Khodorkovsky may not be entirely innocent of the fraud and embezzlement charges he was jailed over, his treatment by the courts during and after his trial has raised questions of legality, which, if unanswered, continue to make Russia seem a dangerous place to do business.Khodorkovsky says his imprisonment is politically motivated. He has accused Rosneft chairman Igor Sechin, who was appointed a Deputy Prime Mminister in May, of orchestrating the campaign against him. The bulk of Yukos’ assets went to Rosneft in a series of forced bankruptcy auctions, building it into the country’s largest oil firm.But the former oligarch has also refused to ask for a pardon, claiming it would imply his guilt. However, he is now entitled to request parole as he has served over half of his sentence.Khodorkovsky’s lawyer, Yuri Schmidt said the former oligarch decided to apply in the hope he would get a better hearing under newly inaugurated Medvedev than predecessor Vladimir Putin. He said: ‘We have much hope in the words of Medvedev on the independence of the judiciary.’The incoming President, having seen Putin bring back into the fold many of Russia’s get-rich-quick oligarchs, is now determined to cut down on low-level corruption and bolster the reputation of the law courts.But the ongoing treatment of Khodorkovsky has called into question the fairness of the judicial system. The plight of Khodorkovsky, former head of the giant Yukos petroleum company, began in 2003 when he was sent to a remote penal colony on multi-billion fraud and embezzlement charges.He was arrested when his jet was stormed by armed police on a runway in Siberia. Overnight he went from being one of Russia’s richest men, to earning 42p per day in the camp. The case was used by Putin to assert his power over Russia’s most influential tycoons.Analysts say it marked the start of a rise in state control over the country’s lucrative energy sector. Putin had been reining in the oligarchs who made huge fortunes in the aftermath of the collapse of the Soviet empire – for example, Roman Abramovich, whom Putin made Governor of remote Chukotka province. However, Khodorkovsky, like Boris Berezovsky who fled to exile in Britain, refused to toe the Kremlin line and was charged withfraud.Now Medvedev, a lawyer by training, has called for a strengthening of the rule of law to combat what he has termed ‘legal nihilism’.Speculation has swirled since Medvedev’s election in March that Khodorkovsky could be released as a way of bringing closure to the case and the slightly embarassing light it shed on the judicial system.Yet the levying of fresh charges – in February 2007 and again earlier this month – have recently cast doubt on the chances of any attempt at parole byKhodorkovsky until this week.Khodorkovsky first became eligible for parole in October 2007, after serving half his sentence on charges that he has called politically motivated. Ten days before he became eligible to ask for parole, another inmate in the Chita prison where Khodorkovsky is being held filed a complaint, accusing him of violating prison regulations, Kommersant newspaper reported.Igor Gnezdilov, a car thief who spent almost a year as Khodorkovsky’s cellmate in 2007, told Kommersant last month that he was forced to file the complaint because he desperately needed to get an early parole himself to save his son from being sent to an orphanage.According to prison regulations, inmates are obliged to keep their hands behind their backs as they are escorted outside their cells. The rule was not strictly enforced in the Chita prison, and inmates sometimes walked with their arms swinging freely, Gnezdilov said.After a daily walk in the prison yard on 15 October 2007, Gnezdilov was called in by the prison administration. A prison official demanded that he write a statement saying Khodorkovsky had been walking down the prison corridor without his hands held behind his back. Initially, Gnezdilov refused to comply. He said: ‘A tiny violation on the eve of the middle of the prison term – and an inmate can forget about being granted an early parole.’But a prison official told him that if he refused to co-operate, he would not be granted an early parole himself. Gnezdilov ultimately bent under the pressure. The same night, Gnezdilov said, he told Khodorkovsky in their cell of what he had done. The former Yukos owner told Gnezdilov that he understood his situation and forgave him, he said. Khodorkovsky received an official reprimand from the prison administration, and Gnezdilov was released in January 2008.Khodorkovsky is still waiting to learn his fate.