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. Last Updated: 07/27/2016

Yukos Attacked on All Fronts

Mikhail Khodorkovsky's business empire was attacked from all sides on Tuesday as prosecutors threatened more criminal charges against senior Yukos managers, called for a probe into the oil major's licensing rights and launched a new raid against Yukos-affiliated Menatep-SPb bank.

A senior prosecutor made a thinly disguised threat that Khodorkovsky might find himself next in line to face a prison term. "I personally don't want Khodorkovsky to be put behind bars," Deputy Prosecutor General Vladimir Kolesnikov said at a news conference. "I want our businessmen to be the best in the world. But there's no need for cheating and stealing -- you have to answer for everything.

"The prosecutors have serious claims against a number of Yukos executives," he said. "Charges will be brought against some of them for earlier crimes. All our activities are aimed at one thing: establishing the truth."

Less than an hour after Kolesnikov's comments, word broke that prosecutors had gone into action.

First, Interfax reported that Menatep-SPb's St. Petersburg headquarters were being raided on suspicion of tax evasion in 2000 and 2001.

Minutes later, news agencies reported that Tax Ministry inspectors had arrived at Sibneft, the smaller oil major that Yukos recently merged with, as part of a separate tax probe. Just last week Sibneft president Eugene Shvidler was called into the Interior Ministry for questioning. Sibneft spokesman John Mann confirmed Tuesday that 19 inspectors were checking documents relating to the company's financial activities in 2000 and 2001.

Then, prosecutors said they had asked the Natural Resources Ministry to open an investigation into whether Yukos was meeting all its licensing requirements.

The bad news came so thick and fast that Russia's bull market could not ignore the mounting pressure on Yukos any longer. The RTS closed down 3.6 percent.

"The market expectation was that the investigations into Yukos were actually good, that it was a way of doing due diligence for Exxon. There's been the most obscene amount of bull-market rationalization," said James Fenkner, head of research at Troika Dialog. "But today was a sharp reminder that there's a lot more to this than a PR campaign.

"There is an enormous amount of money in the market, an enormous amount of optimism. I don't know whether this is the point at which it will turn, but it will definitely be a break," he said.

Prosecutors started the new attacks just four days after they pressed tax evasion charges against core Yukos shareholder Vasily Shakhnovsky. On Monday, a senior prosecutor upped the rhetoric, saying Khodorkovsky could be soon called in for questioning and warning that tax evasion charges might be brought soon against other senior Yukos executives.

The onslaught against Khodorkovsky's empire began in July when another core Yukos shareholder, Platon Lebedev, was jailed on charges he stole state property in a 1994 privatization deal. Since then, the investigations have mushroomed to include allegations of murder, attempted murder and tax evasion.

Analysts have said the attack is an attempt to curb Khodorkovsky's political ambitions. Not only has the nation's richest man has been openly funding opposition parties ahead of elections, but he also has attempted to push his own policy agenda on key state issues such as pipeline strategy.

The onslaught also comes amid a vicious battle for position between the old elite that came to power and wealth under former President Boris Yeltsin -- including Khodorkovsky -- and a hard-line faction known as the siloviki that arrived in the Kremlin with President Vladimir Putin.

Analysts said Tuesday that the new burst of activity from prosecutors came amid signs that the Kremlin faction backing the old elite, known as the Family, might be beginning to cave in. The head of the presidential administration, Alexander Voloshin, has been seen as the main protector of that group.

"Rumors of Voloshin's upcoming resignation are continuing to come from the Kremlin and, judging by their frequency and their consistency, it seems he will not survive the elections. He is gradually losing real control over the Kremlin apparatus," said Andrei Ryabov, political analyst at the Moscow Carnegie Center. "What's happening now is a sign of the shift in the balance of power."

Ryabov added: "Another reason for the recent burst also appears to be Yukos' increasing activity in trying to sell a stake to a foreign oil major. If such a deal happened, this would not suit the siloviki as YukosSibneft would then fall completely out of their control."

Yukos has been in talks to sell a strategic stake to ExxonMobil. ChevronTexaco is also thought to be interested in a deal.

"The clock has started ticking. [Prosecutors] are hurrying. If they don't manage to destroy the deal in time, YukosSibneft will fall out of their control," Ryabov said.

He said Putin's absence -- the president has been attending an APEC summit in Thailand -- could serve to help him distance himself from the new multi-pronged attack.

Kremlin-connected political analyst Sergei Markov said the onslaught was coming as tensions reach a boiling point on the big undecided question of Putin's presidency: what to do with big business.

"All this is happening now because of the lack of a solution to Putin's biggest political problem," he said.

"He's still choosing what his political course is going to be and what the role of big business should be," he said. "Yukos is being used as an example to the rest of business."

Yukos spokesman Alexander Shadrin lashed out at the prosecutors' tough rhetoric Tuesday, saying that despite almost four months of talk, no case has been sent to court.

"If the company's managers have to receive criminal charges and be imprisoned in order for the so-called Yukos affair to be heard in public and open court proceedings, then they are ready," he was quoted by Interfax as saying.

He also ridiculed a request from prosecutors that the Natural Resources Ministry provide full data on Yukos' extraction figures for 2002 and the first half of 2003.

"In order to reduce the volume of senseless document exchange between two respected state institutions, this secret information is available on our web site," he said.

The request was included in a letter sent by First Deputy Prosecutor Yury Biryukov to Natural Resources Minister Vitaly Artyukhov asking for a full investigation into Yukos' licenses. The letter was sent just a day after the Natural Resources Ministry announced the creation of a separate department to check oil majors' licensing agreements.

Prosecutors said the letter was prompted by a complaint about the "irrational use of natural resources and tax avoidance by Yukos" filed by State Duma Deputy Gadzhi Makhachev.

The Prosecutor General's Office has also requested information from the Tax Ministry, the Energy Ministry and the State Customs Committee, a prosecutors spokesman told Interfax.

The raid on Menatep-SPb seemed especially badly timed. It came just hours after the bank's management held a news conference to announce with fanfare the completion of the first stage of its consolidation plans.

"We expect to become the national champions of the financial industry by offering all [banking] products everywhere in Russia," said Ilya Yurov, the chairman of both Menatep-SPb and Yukos-connected Trust bank.

Yurov also said Lebedev has been retained as chairman of Menatep IFC, the holding company that manages Menatep-SPb and Trust. He declined to comment on Lebedev's role in the banks' consolidation.

"It seems the shareholders believe Lebedev is capable of representing their interests in the holding company," Yurov said.

But he said the Yukos affair hangs over the group in an "indirect manner."

Lebedev, meanwhile, was moved earlier in the day from the FSB's Lefortovo prison to the Matrosskaya Tishina prison. Prosecutors said the move came in response to a complaint filed by Lebedev that overcrowding in Lefortovo was hindering his access to court documents as he prepared his defense.

But the news he had been moved to Matrosskaya Tishina as a result was a surprise to his lawyer, Anton Drel.

"All I can say is that when we came to the Lefortovo prison, we were told that Lebedev was no longer there and that they had moved him to Matrosskaya Tishina," Drel said by telephone. "He hadn't asked to be moved -- this is a way of putting pressure on him.

"If investigators make the decision to move him, then clearly the conditions won't be worse," a spokesman for the prosecutor's office said. "It's in our interests for all his rights to be upheld."

Staff Writers Catherine Belton and Alex Fak contributed to this report..