Due West: The Kremlin vs. Yukos

© Photo : KommersantKonstantin von Eggert
Konstantin von Eggert - Sputnik International
The European Court of Human Rights verdict regarding the Yukos case is, frankly, not very good news for Mikhail Khodorkovsky and his supporters.

The European Court of Human Rights verdict regarding the Yukos case is, frankly, not very good news for Mikhail Khodorkovsky and his supporters. Although both sides – Russian state officials and Yukos lawyers – expressed satisfaction, it is quite clear that the outcome is a victory of sorts for the Kremlin. 

While admitting that Yukos shareholders rights were violated in the process of the company’s bankruptcy, the court stated that it found no evidence of the authorities deliberately bankrupting Yukos. This undermines the campaign by Yukos supporters to portray Mikhail Khodorkovsky and his business partner Platon Lebedev as victims of a political vendetta by Vladimir Putin.

Svetlana Bakhmina, a former Yukos accountant, who had spent several years in prison in connection with the case, bitterly admitted as much in an interview with my own radio station within a few minutes after the verdict. It’s quite clear why this is so: it is one thing to commit irregularities while conducting what the Strasbourg judges ruled was essentially a lawful tax evasion case. It is another to deliberately ruin the company in order to expropriate its assets. So, can Moscow officials drink a glass of champagne? Probably yes, but they may not be celebrating for too long.

The court gave the two sides – Yukos plaintiffs and the Russian authorities – three months to come to a voluntary settlement. Bearing in mind the context and the vehemence of emotions on both sides, this sounds like a thoroughly post-modern irony on behalf of the judges. This is war, pure and simple, and neither side is prepared to cede ground.

For the Russian state, and personally for Vladimir Putin who came out strongly against Khodorkovsky and Yukos, any admittance that the other side may somehow be right is seen as being tantamount to surrender and the loss of face.

For the former Yukos management nothing short of a very significant compensation payment will do. Only this would completely satisfy the validity of their claim. The court is supposed to return to the issue in three months and might well then decide on the compensation claim. And this will be another problem for Moscow. Previously it had paid a few thousand euros from time to time to those who the European Court of Human Rights decided were abused by the Russian state – for example, civilians who lost relatives as a result of the Russian army’s actions in Chechnya. But these cases never garnered even one hundredth of publicity that the Yukos complaint did.

There is also another question: who will have to pay whatever the court decided was due to Yukos shareholders? Is it the government or the state-owned Rosneft company? In the former case, the Russian state will have to admit its justice system is badly flawed. This is bad for its image and will have a significant impact on foreign investors’ behavior. If it is the latter, then Rosneft will de facto admit that it is making use of a property that was, if not deliberately, then at least wrongly appropriated. This is not good for Rosneft’s image, but also for its annual results and extensive program of international partnerships, which includes a recently signed agreement with ExxonMobil. So the Strasbourg intrigue remains interesting.

However, there is another Yukos court case slowly chugging along in the international arbitrage in The Hague. There a group of former Yukos shareholders are suing the Russian state for 100 billion dollars for its alleged breach of investors’ rights under the Energy Charter. Russia withdrew its signature from it in 2009, but the case filed refers to the 2004-2007 period when Moscow was a Charter signatory. The decision is not expected before 2012, if not 2013. Should the arbitrage rule in favor of Yukos plaintiffs, the decision may cause even more problems for the Russian authorities. Armed with such a verdict Yukos lawyers can go to any court in any of the 51 countries that signed up to the Charter (plus the EU), and ask it to issue an order to cease any Russian state assets found there. The potential for scandal here looks infinite.

There will no doubt be no shortage of new dramas in the Yukos vs the Kremlin standoff.

The views expressed in this article are the author’s and may not necessarily represent those of RIA Novosti.

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What is Russia's place in this world? Unashamed and unreconstructed Atlanticist, Konstantin von Eggert believes his country to be part and parcel of the "global West." And while this is a minority view in Russia, the author is prepared to fight from his corner.

Konstantin Eggert is a commentator and host for radio Kommersant FM, Russia's first 24-hour news station. In the 1990s he was Diplomatic Correspondent for “Izvestia” and later the BBC Russian Service Moscow Bureau Editor. Konstantin has also spent some time working as ExxonMobil Vice-President in Russia. He was made Honorary Member of the Order of the British Empire by Queen Elizabeth II.

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