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Last Updated: Tuesday, 28 December, 2004, 22:14 GMT
Putin aide slams Yukos sell-off
Andrey Illarionov
Illarionov often sharply contradicts Putin's ministers
President Vladimir Putin's economic adviser has bitterly criticised the dismantling of the Russian oil giant Yukos, crippled by tax demands.

Andrei Illarionov blasted "the state's incompetent interference in the economy", at a Moscow news conference.

"There are no rules," he lamented, adding that Russia had decided to join the Third World.

Speaking from prison, the firm's ex-boss Mikhail Khodorkovsky accused the Kremlin of "senseless" actions.

Mr Illarionov, whose views often contrast with those of top Russian government officials, said the country had changed its model of economic development.

'Scam of the year'

"A transition has been made... to the interventionist trend. This model implies the state's extremely incompetent interference in the economy," he said.

Today we made the decision to join the Third World
Andrey Illarionov

He denounced the recent forced sale of the main Yukos production unit, Yuganskneftegaz, as "the scam of the year".

"We used to see street hustlers do this kind of thing. Now officials are doing it," Mr Illarionov said.

The Kremlin says its actions against Yukos are part of an anti-corruption drive.

Last week Russia's state-owned oil firm Rosneft bought 100% of Baikal Finance Group, an obscure firm that earlier bought the key Yukos production unit Yuganskneftegaz. The Rosneft move amounts to the renationalisation of a major slice of Russia's booming oil industry.

Yukos reiterated on Tuesday its intention to sue all organisations and individuals involved in the enforced auction of Yuganskneftegaz.

The company said it would seek damages of more than $20bn.

Earlier, President Putin said 2004 was a successful year for the Russian economy and insisted that the state had handled Yukos in a completely legal manner.

However, Mr Illarionov said Russia's economic growth had slowed significantly, as had the inflow of investment.

"The destruction of Yukos has led to the flight of foreign investors from this company, who have to move their assets into consortiums linked to the authorities," Mr Illarionov said.

Thoughts from jail

Meanwhile, ex-Yukos boss Mikhail Khodorkovsky has spoken to the Russian daily Vedomosti from prison, saying there is almost no chance to save the company, following the controversial sale of Yuganskneftegaz.

Mikhail Khodorkovsky
It is not a conflict between a business and the state - rather it is an attack by one business represented by state officials on another
Mikhail Khodorkovsky

"The question is what lessons the country will take from the Yukos affair, whose finale is the most senseless and destructive event for the economy in all of President Vladimir Putin's time in power," he wrote.

He has been in prison since November 2003, waiting for the end of his trial on charges of massive fraud and tax evasion.

He told Vedomosti that "parting with my property will not be unbearably painful".

"I... should say thanks to the prison. It gave me time for intense contemplation and reassessing many aspects of life," he said.

Deprived of Yukos, he said he now felt like "an upper middle class man" who had preferred personal freedom to property.

"It is not a conflict between a business and the state. Rather it is an attack of one business represented by state officials on another. The state is a hostage to the interests of specific individuals."

He said he expected to spend another five years in prison after the trial.


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