Why was Mikhail Khodorkovsky sent to jail and his company bankrupted?

Research Paper (undergraduate), 2006
10 Pages, Grade: 2


Why was Mikhail Khodorkovsky sent to jail and his company bankrupted?

The Khodorkovsky affaire has been a big event in the media and was also criticised heavily at the time. Especially the Russian government moved into the interest of the critics. There were quite early signals that a Khodorkovsky case might develop. On the 2nd of July it started all off when Platon Lebedjew, partner in Yukos, and also the Menatep-Bank manager who was connected to Yukos moved into the spitfire of the state prosecution. At the beginning the case was about irregularities of privatisation process of a mine. That time Khodorkovsky was only invited as witness. But soon after the research process was widened into other areas of the Yukos firm. There were disagreements between the state oil firm Rosneft and Yukos about share packages of a Siberian oil firm. Platon Lebedjew was then on the 28th of July accused of tax fraud. Even at these early stages Khodorkovsky describes the whole actions against Yukos as part of a power struggle between rivalled sections around Putin. Therefore in this essay I am going to evaluate how much the government and Putin were involved in the affair and because of what reasons. Therefore I am going to focus on different theses.

Political reasons played an important role right from the beginning of the Yukos case. This became clear when Russian politicians started to comment on the case. At the beginning Wladimir Putin was not willing to interfere with the case: “In talks with the chairmen of the Russian trade union, and the association federation Arkadij Wolskij, Putin said that he would not care about Yukos and also would not put anyone into prison”. (Russland-Aktuell, 2003) Even after Khodorkovsky was imprisoned, Wladimir Putin kept still and did not interfere. He was asked to take part in a discussion about the Yukos affair where he did not agree to attend. He was against the interference of the government in the prosecutions actions. But there were different members of the government that interfered right at the beginning. Michail Kassjanow was prime minister at the time and pressured the government to release Lebedjew from prison. This proposal was not accepted by the prosecution system as they were against the political interference. The affaire was given a political dimension, which goes further than the juridical discussions. In many different interpretations of the Khodorkovsky affaire the questions arises if there was really a quilt of tax fraud why he send to jail or other reasons that played a more important role. There is more the interest in the fact that the Russian Justice system was investigating against oil firms and the Chairmen at that time. To explain the whole situation I am going to focus on different theses that might have been the reason for the actions that were taken.

In the first thesis the economic reasons might explain why actions were taken against the Yukos firm. Yukos planned to advance its capacities on a global level by cooperating with American oil firms. Allegedly Exxon, a large oil firm, planned to buy 40% of the Yukos share for 25 billion. (Rusnet.nl ,October 8, 2003) Also Chevron Texaco Corp was holding talks with the firm. Here the interest was cooperation between the oil giants, and also an exchange of stake to keep the cooperation tight. (Ehlers, Kai, 2004) Khodorkovsky denied that talks like this took place because he expected that Russia could turn against him. Therefore it can be argued that he was arrested because he was planning to start cooperation’s with American oil firms which would harm the domestic economy. Also Russians don’t like the idea of selling homeland stakes to foreign investors, because the extraction of Russian sources could benefit other capital markets. Another reason is that Khodorkovsky collided with Putin on external political grounds. Putin was planning to build an oil pipeline to Japan because of political reasons. On the other side Khodorkovsky planned an oil pipeline to China at the same time. Therefore this was another big interference of Khodorkovsky in Putins political plans. Not only that he wanted to bring American oil giants to Russia, he also disrupted Putins pipeline development. Hence we can speculate that the important reason for the arrest was Khodorkovsky aggressive way of making business and not really the tax fraud or the other reasons. We have to consider that Putin stressed the fact that national pipelines, oil and gas must stay in Russian control as they are the key tools to economic and political influence. He also mentioned that investors might be allowed to invest, but certain measures (Baker James, 2004) are in place depending on the financial status of Russia. This thesis is also confirmed by the Russian minister of interior. He argued that Russian recourses can not be owned by firms or by a private person, as everything belongs to the Russian population. If a firm works on these grounds, then it doesn’t mean that the profits can be privatised. (national-zeitung.de) Therefore we can see a certain way of nationalism and economic dependence that affected the international cooperation with other oil firms. Russia did not agree how Khodorkovsky was trying to sell the national cash machine to international investors. Hence we can say that this was certainly one of the reasons that led to the arrest. This way the oil giants would be threatened, hence put off the idea to merge with other firms in the long run. This argument was even more stabilised when the replacement of Khodorkovsky announced that the talks with American oil firms were stopped because there was no synergy between the firms. So it seems that the Russian state has been successful in keeping the private businesses in Russia, and got rid of Khodorkovsky as he was a big threat to Putin’s economy and plans. After actions of the prosecution there seems to be a possibility that the Russian state will try to gain back at least parts of the recourse reserves. At this point all big Russian oil firms are privatised. Boris Gryslow, the minister of interior has made some important utterances about this.


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Why was Mikhail Khodorkovsky sent to jail and his company bankrupted?
The University of Sydney
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Mikhail, Khodorkovsky
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BSc Daniel Döring (Author), 2006, Why was Mikhail Khodorkovsky sent to jail and his company bankrupted?, Munich, GRIN Verlag, https://www.grin.com/document/79532


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