[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Tuesday, 31 May, 2005, 09:49 GMT 10:49 UK
Khodorkovsky: an oligarch undone
By Jeremy Scott-Joynt
BBC News business reporter

Mikhail Khodorkovsky
Both Mikhail Khodorkovsky and his company have been targeted
Russian oligarch Mikhail Khodorkovsky recently suffered the ultimate indignity in the world of the super-wealthy.

He has been ousted from the top spot in Forbes magazine's Russian Rich List by Roman Abramovich, a fellow energy tycoon whose main claim to fame outside Russia is as owner of London football club Chelsea.

But that is hardly his only source of dismay.

After a trial lasting 11 months, the former owner of oil giant Yukos has now been sentenced to nine years in prison.

Also on trial was Mr Khodorkovsky's business partner Platon Lebedev, who was also jailed for nine years.

How did it come to this?

Rags to riches to rags

Only a few years ago, Mr Khodorkovsky was on top of his game, sitting on assets estimated to be worth upwards of $15bn.

Yukos was Russia's second biggest oil company, pumping one in every five barrels the country produced.

President Vladimir Putin
Has Vladimir Putin targeted a potential rival?

Like the rest of Russia's class of super-rich businessmen, Mr Khodorkovsky had profited from the string of cut-price privatisations launched in the mid-1990s.

After running a computer import business under the wing of the Communist Party's youth movement in the 1980s and starting Menatep bank in 1987, he used the proceeds to buy up state assets.

One was fertiliser company Apatit, which he acquired in 1994.

A year later he snapped up Yukos for $300m, with Menatep assuming $2bn in debt.

At its peak the oil firm set its own worth at more than $20bn.

It is not worth as much now - after a tax audit, Yukos is facing back tax bills for billions of US dollars, has had its assets seized and its most productive unit acquired at a bargain rate by state-owned oil firm Rosneft.


Mikhail Khodorkovsky's problem is that becoming one of the oligarch class can be a murky business.

The 1990s privatisations involved an implied obligation. New owners of Russia's prize assets - including its media - would get the wealth; but could not oppose the Kremlin.

Mr Khodorkovsky started out following the loyal route, even serving as deputy fuel and oil minister under President Boris Yeltsin.

But he eventually began to fund political parties - his cash went to almost every party, including the Communists - increasing suspicions that he might have political ambitions of his own.

His acquisition of the rights to publish the Moskovskiye Novosti newspaper and his hiring of a well-known investigative journalist critical of President Vladimir Putin lent weight to this impression.

Shortly before elections in 2003, fellow Yukos shareholder Platon Lebedev was arrested for fraud in a move widely regarded as a warning to Mr Khodorkovsky to keep out of politics.

Yukos headquarters
Yukos is a shadow of its former self

But Mr Khodorkovsky did not heed the warning. Four months later, armed security forces took him off his private jet at an airport in Siberia. He has been behind bars ever since.

Criminal or political?

Mr Khodorkovsky's supporters have always insisted the trial was an attempt by President Putin's administration to silence a potential rival.

The Kremlin hotly denies the accusation - although Economy Minister German Gref told the BBC in June 2004 that the trial had "a certain political element".

He implied Mr Khodorkovsky had stepped out of line, and his past behaviour provided plenty of ammunition for criminal charges.

One of the central planks of the government case was the privatisation of Apatit. Mr Khodorkovsky promised massive investment at the time, which later failed to materialise.

Prosecutors said this was fraud - as was the use of networks of offshore and dummy companies to acquire shares in sold-off state enterprises.

Demonstrators backing Mikhail Khodorkovsky
Khodorkovsky supporters say the case is about politics

There is also the tax case against Yukos. Russian law makes shareholders financially responsible for corporate misdeeds, but assigns criminal liability to company officers.

Mikhail Khodorkovsky was both, and has therefore lost billions along with facing corporate, and personal, tax evasion charges.

Firing line

He is not the first tycoon to face the Kremlin's wrath.

In the late 1980s another computer importer, Communist Party apparatchik Artyom Tarasov, was prosecuted for "economic crimes" and - despite being acquitted - had his business ruined.

Boris Berezovsky was another beneficiary of the 1990s state sell-offs, but his media channels started to criticise the Kremlin.

He is now a refugee in London facing charges should he return home.

But the assault on the oligarch class has been highly selective.

Most remain untouched even though many share a similar trajectory to wealth and power. Mr Abramovich, for instance, is governor of a remote Siberian state - but has kept out of national politics.

And President Putin's "State of the Nation" speech on 25 April held out the promise that the tax authorities would be reined in.

Now that both Mr Khodorkovsky and Mr Lebedev have been convicted, they may find that few of their former rivals end up meeting the same fate.

The BBC is not responsible for the content of external internet sites


News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East | South Asia
UK | Business | Entertainment | Science/Nature | Technology | Health
Have Your Say | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific