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Monday, February 18, 2008

Kremlin Inc., Killing Khodorkovsky

Moscow Times op-ed columnist Tom Osbororn exposes the neo-Soviet horror of Putin's barbaric crackdown on Mikhail Khodorkovsky in the manner of the mafia, attacking all associated with him purely for purposes of terror:

Nothing seems to dampen the authorities' enthusiasm to wipe out any trace of Yukos, which at one point was the country's largest and most transparent oil production company. More than 45 people connected to the company have been the target of legal action and the company's assets were expropriated. These actions against Yukos reveal a justice system that is infected with corruption and political bias. They have also demonstrated the complete breakdown of rule of law in Russia.

The authorities' enthusiasm to utterly destroy everything connected to Yukos has almost led to a de facto death sentence for former Yukos vice president Vasily Aleksanyan, who was refused life-saving medical treatment unless he provided false testimony to incriminate his friends. Thankfully, following international pressure and Mikhail Khodorkovsky's hunger strike, Aleksanyan appears to be finally receiving treatment for his illnesses.

This denial of Aleksanyan's rights came at the same time as the government's attack on the British Council. Authorities arbitrarily targeted employees' tax affairs and threatened their families. Britain's foreign secretary has said Russia's actions against the British Council violated its obligations under the Vienna Convention.


Together with the nonobservance of international treaties, the abuse of Aleksanyan's rights once again demonstrates Russia's flagrant disregard for truth and the rule of law, which has characterized the Yukos affair from the beginning. This was highlighted in comments by Yukos' government-appointed receiver, Eduard Rebgun, who told Russia Today television in January that Yukos had made no effort to save itself -- something it "could have done if it had wanted to do so."

I have heard countless fabrications about the company and its owners, witnessed its unnecessary destruction by the Russian government, and seen its employees and shareholders harassed, arrested and imprisoned. But never have I heard anything quite as disingenuous as Rebgun's remark.

Rebgun would do well to recall a ruling in an Amsterdam court in October, which stated that the legal process by which Yukos was declared bankrupt does not hold up under scrutiny. The court ruled that no appeal by Yukos in the Russian courts could repair the "fundamental legal defect attached to the bankruptcy order" and that "in the bankruptcy proceedings, no substantive, sufficiently safeguarded, judicial review took place or could have taken place of the manner in which the additional tax assessments, as imposed by the Russian tax authorities and determined by the tax court, were determined."

This ruling nullified any decisions Rebgun had made regarding Yukos' foreign assets, owned by subsidiaries in the Netherlands. It was yet another indication that no one outside the cabal that orchestrated the dismemberment of Yukos believes the bankruptcy was anything other than a manipulated sham to steal the company's assets. It is this same cabal that controls the fates of Yukos employees languishing in Russian jails after their flawed trials.

The authorities went to considerable lengths, starting in July 2006, to ensure that a viable rescue plan put forward by Yukos management was dismissed by the company's creditors. Even though I was Yukos' nominated representative to the creditors' meeting that decided the fate of the company, Rebgun denied me free access to the "bankruptcy" report. I was told that I would have to come to Moscow in person to review the documents -- an unattractive option considering he had told me a few weeks earlier that he could not guarantee my safety in Russia. Rebgun's words proved to be frighteningly prescient, considering the recent ill treatment of Aleksanyan.

In their rescue plan presented at that creditors' meeting, Yukos' management demonstrated that the company was a viable entity and could pay its legitimate creditors within 18 months.

The meeting, however, was made up almost entirely of government-controlled entities that were intent on destroying Yukos. They brushed aside management's attempts to save the company, choosing bankruptcy instead.

Despite claims by President Vladimir Putin that the Kremlin had no interest in bankrupting Yukos, the company's assets were auctioned at below-market value. In addition, new debts suddenly emerged out of nowhere, preventing the company from surviving. The main beneficiary of these tactics was Rosneft.

It is clearer now than ever that the expropriation of Yukos was a ploy to put key elements of the energy sector in the hands of Putin's retinue. Moreover, the Yukos affair marked a turning point in Russia's commitment to domestic property rights and the rule of law.

GML, the majority owner of Yukos, is seeking compensation from Russia under the binding terms of the Energy Charter Treaty, which Russia signed in 1994. We expect the damages to be in excess of $50 billion. Pursuant to the New York Convention, the award, if it is not settled voluntarily, will be fully enforceable on any Russian government assets outside the country not covered by sovereign immunity.

This is the largest commercial arbitration claim ever filed. Hearings will begin in November. We will demonstrate that Yukos did everything possible to save itself and that the only thing from which it needed protection was the Russian government.

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