Wed, Nov 05, 2003 - Page 7 News List

Jailed Russian tycoon resigns from post

CORPORATE STRATEGYIn an attempt to protect the largest oil producer in Russia from a criminal investigation, Mikhail Khodorkovsky handed in his resignation


Oil tycoon Mikhail Khodorkovsky, jailed on charges of fraud and tax evasion, described his resignation from the Yukos company as a move to save the oil giant from an escalating criminal probe that has seen top shareholders imprisoned and a large chunk of Yukos stock frozen.

"As the leader, I must do all I can to free our work collective from the blow aimed against me and my partners," Khodorkovsky, who turned Yukos into Russia's largest oil producer, said Monday in a statement. "I am leaving the company."

Khodorkovsky's resignation came nine days after he was jailed in Moscow during a four-month-old investigation of the oil company that has dragged down Yukos shares, caused the Russian stock market to plunge and raised questions about Russia's economic and political course.

The price of Yukos shares shot up by 3.9 percent immediately after Khodorkovsky's announcement in Moscow trading, ending the day up 12 percent at US$12.65. The share price is still more than 20 percent below its all-time high posted just before Khodorkovsky's arrest.

Critics say Khodorkovsky was chosen as a target by President Vladimir Putin's fellow ex-KGB officers in the Kremlin to curb his growing financial and political clout and avenge his funding of opposition parties.

His jailing and last week's court decision to freeze 44 percent of Yukos' shares stoked fears that prosecutors are laying the groundwork for a redistribution of state assets privatized after the 1991 collapse of the Soviet Union.

The often-dubious privatization deals created tycoons, such as Khodorkovsky, who bought up state assets at rock-bottom prices, earning the contempt of their impoverished compatriots.

Putin and his ministers have denied that privatization -- considered at the time as a key way of preventing the Communists from returning to power -- will be revisited. But Washington has warned that the escalating probe raises "serious questions about the rule of law in Russia." Germany, Russia's largest trading partner, has also said that it is watching the process closely.

In the statement, Khodorkovsky said "the situation that has taken shape today forces me to drop my plans to continue personal involvement in the development of the company," which is finalizing a merger with its smaller rival, Sibneft, to create the world's fourth-largest oil company.

Oil analysts praised his move to step down, saying that it should help take pressure off Yukos.

"He is in jail. He can't really be an effective chairman," said Vitaly Yermakov, an oil analyst with Cambridge Energy Research Associates in Moscow. "For all practical purposes, it is a normal move of a person that cares about his company."

Khodorkovsky can be held until Dec. 30, but prosecutors can easily seek further extensions just as they have with a top Yukos shareholder, Platon Lebedev, who has been jailed since July.

In the statement, Khodorkovsky said he was "certain that the highly professional, close team of experienced managers" will move the company forward. Russian media reported that American Steven Theede, in charge of Yukos' day-to-day operations, is the most likely Yukos manager to succeed Khodorkovsky.

But while Yukos may get some breathing space, Khodorkovsky is unlikely to, analysts said.

"It doesn't change the view [of those who consider] that Khodorkovsky is a man with a lot of money who has to be brought down to size," said Stephen O'Sullivan, head of research at United Financial Group in Moscow.

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