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. Last Updated: 07/27/2016

Oligarchs to Appeal to Putin on Yukos

Leaders of Russia's business elite, and even a senior U.S. diplomat, appeared to rally round embattled Yukos owner Mikhail Khodorkovsky on Wednesday as shares in his company tumbled 5 percent on news a politically charged prosecutors' probe was escalating to target the company itself for tax evasion.

Members of the Russian Union of Industrialists and Entrepreneurs, the main lobbying organization for the oligarchs, gathered Wednesday to discuss last week's arrest of key Yukos shareholder Platon Lebedev on charges of theft of state property in 1994.

The RSPP's executive secretary, Igor Yurgens, was quoted by Interfax as saying its members had agreed to write an appeal directly to President Vladimir Putin, amid growing concern that the Yukos probe could snowball into a wider re-examination of murky past privatization results by a Kremlin clan bent on gaining more power.

But in a sign of the high-risk stakes surrounding the Yukos affair, no joint public statement of support for Yukos was issued. And RSPP president Arkady Volsky said there is no need to see the situation as an attack on all businessmen.

However, some leading businessmen fear the attack could lead to a rapid unraveling of the economic achievements of recent years. A move on Russia's still shaky private property rights could tear apart the stability of past years and send investors, domestic and foreign, hightailing it out of the country, thrusting the economy into a tailspin.

"The actions of certain politicians, supported by members of the security services ... are aimed at undermining the country's stability, at re-examining the results of privatization, and at painting businessmen as enemies," Yurgens said.

"This is having an extremely negative impact on the investment climate in the country and is provoking uncertainty among society," he said, in the strongest statement yet by a member of the country's business elite about the attack on Yukos.

But other big businessmen attending the meeting were less ready to provoke potential Kremlin wrath. Asked whether the RSPP members would call for the release of Lebedev, the normally outspoken head of United Heavy Machineries, Kakha Bendukidze, replied with a curt "I don't think so," Interfax reported.

Volsky, however, predicted he could be freed within the next few days, Interfax reported.

Vladimir Yevtushenkov, the head of the financial industrial group Sistema, said Khodorkovsky had asked the RSPP members not to raise his problems with the prosecutors, Interfax said.

Khodorkovsky received support Wednesday from a more surprising source: the U.S. State Department.

Khodorkovsky in recent years has tied the success of his company to greater integration with the West. As well as embarking on a massive public relations campaign and improving Yukos' financial reporting, he has openly courted the U.S. administration. He has been at the forefront of moves to boost U.S. energy security by sending Russian crude to the United States.

Those moves appeared to have paid off. On Wednesday, a senior U.S. official said the U.S. Embassy has asked for a clarification of the developments surrounding Yukos. He said the investigation, together with the recent yanking of TVS from the air, "raises questions" about where democracy is headed as elections approach.

"We're concerned about what political agenda may be behind these steps," the diplomat said on condition of anonymity, adding that they could have "a certain dampening effect on the energy relationship" that the United States and Russia are building.

The official also said the move could raise red flags for foreign investors concerned about stability in Russia.

Khodorkovsky met with U.S. Ambassador Alexander Vershbow just hours before Lebedev was arrested to inform him of the upcoming wrangle, the diplomat said. The day after the July 2 arrest, Khodorkovsky's first public port of call was the U.S. Embassy's official Independence Day reception held at the ambassador's Spaso House residence.

Now, Khodorkovsky is set to take his case straight to Washington. "Khodorkovsky will be meeting with a wide range of high ranking people in Washington, D.C. over two days," said Hugo Erikssen, Yukos' spokesman. He would not disclose, however, which U.S. officials Khodorkovsky is due to meet with. He leaves Friday on a five-day trip to the United States, where he also plans to meet with investors, Erikssen said.

Some observers have speculated that Khodorkovsky's backing in the West could have added to perceptions he could pose a political threat to some factions within the Kremlin.

Analysts see the attack on Yukos as being engineered by Putin allies in the Kremlin from St. Petersburg led by former KGB men Viktor Ivanov and Igor Sechin.

But even as the business elite, together with the State Department official, appeared to consolidate behind Khodorkovsky, the investigation against his empire escalated to include a probe into possible tax evasion by Yukos.

The query was launched at the request of State Duma Deputy Mikhail Bugera, deputy leader of the pro-Kremlin Russia's Regions faction. According to Bugera, Yukos only paid 90 million rubles ($3.3 million) in federal taxes last year, while receiving 2 billion rubles in various reimbursements, Interfax reported, citing his letter to the Prosecutor General's Office.

When reached by telephone, officials at the prosecutor's office confirmed that the investigation is under way, but refused to provide any further details.

Bugera's figures, however, were way under the amounts recorded in Yukos' 2002 GAAP results, which showed Yukos paid $445 million in income taxes last year, said Valery Nesterov, oil and gas analyst with Troika Dialog investment bank.

Yukos denied the allegations of tax evasion and put Yukos' tax payments at an even higher figure. Spokesman Alexander Shadrin said Yukos had paid 101.7 billion rubles ($3.4 billion) in taxes last year, Interfax reported.

The allegation from "Bugera, who has a degree in economics, claiming that the oil company paid the said ridiculous sum in 2002, can only cause confusion," Shadrin was quoted as saying.

Nesterov said the tax probe sent a further sign to market players, who are aware of Yukos' own GAAP tax figures, that the case against the company is politically motivated.

Yukos shares fell about 7 percent during the day and by the close of trade Wednesday were down more than 5 percent at $13.4 per share.

LUKoil, Russia's second-biggest oil major, also took a pummeling. But Nesterov said a 7 percent slide in its share price was fueled by a major profit-taking operation by a U.S.-based pension fund and had little to do with politics.

All in all, Russia's RTS benchmark stock index lost 19.56 points, or 3.81 percent, Wednesday to close at 493.77.

Nesterov said the query into taxes could melt away. "The issue of oil companies and taxes is raised every year, but with no or little outcome. What is more worrying is that the focus of attention has switched to Yukos itself, while before it was all about individuals within the management or its parent company."

Lebedev, director of Yukos' parent company, Group Menatep, was charged with embezzling more than $280 million worth of shares in the Apatit fertilizer producer in 1994. Last month, the head of Yukos' economic security department was arrested on charges of organizing two murders in November 2002.

In an attempt to calm investors, Khodorkovsky had claimed over the weekend that the prosecutors' attack was targeted only at certain Yukos shareholders and not at the company itself. On Tuesday, however, law enforcers said they were also looking into allegations the company illegally transferred 19 percent of Yeneseiskneftegaz, which holds the rights to the vast Vankor field in eastern Siberia, away from its new owner, Rosneft.

News reports have claimed that prosecutors are also reopening a case into whether Yukos illegally siphoned off the state's stake in its key East Siberian outpost, the Eastern Oil Co, or VNK, in 1998.