Energy & Economics
Since 2003 the attack on Yukos and the Khodorkovsky-Lebedev trials have inflicted billions of dollars of damage to the Russian economy as investors and businesses interpreted the campaign to be an attack on property rights.
Many observers believe the release of Khodorkovsky would demonstrate a new commitment by Russia to the rule of law and free-market values. In fact, when it was incorrectly reported that Khodorkovsky was granted parole, the Russian stock market reacted positively, and then plummeted again when the rumors were found to be untrue.
Khodorkovsky's vision for the development of the Russian energy sector was at odds with political forces in 2003. His arrest began a Kremlin-led process of redistributing control and ownership of the Russian energy industry. Meanwhile, since his arrest, Khodorkovsky has warned of Russia's over-reliance on traditional energy exports and a lack of investment in the next generation of industries. Yet the Russian Government has not heeded Khodorkovsky's warnings.
The unlawful seizure and forced auction of Yukos's core production unit, Yuganskneftegaz, in December 2004 was the watershed event which began the process of redistribution of property within the energy sector and other strategic industries in Russia. The expropriation of Yukos assets through a state-orchestrated forced bankruptcy made Rosneft Russia's leading extraction and refining company.
International arbitration has since confirmed the illegality and political motivation of the Russian government's expropriation of Yukos assets.
In the first months after Khodorkovsky's arrest the Moscow RTS index plunged over 20% and triggered a massive capital flight. In the year after Khodorkovsky's arrest, capital flight - only $2.9 billion in 2003 - soared to $9 billion.
International investors were frequently warned by business analysts that Russia's retreat from the rule of law would inevitably undermine Russia's financial markets. In case after case, such as with British Petroleum or Royal Dutch Shell, the Russian authorities have forced their will on foreign investors despite existing agreements.
In the wake of the Yukos Affair, growth of Russian oil production began to slow due to a shortage of long-term investment. "The oil market has been stalemated because of the Yukos affair," said Anders Aslund, a senior associate with the Carnegie Endowment for International Peace and expert on the Russian economy. "When you're fighting over property rights, you don't do big projects." In interviews conducted via his legal defense team, Khodorkovsky has cautioned investors in Russia "not to count on the law to uphold their rights".
Russia's economy meanwhile is increasingly mired in corruption, as confirmed by several leading international organizations. In Transparency International's Corruption Perceptions Index 2010, Russia was ranked 154th out of 180 countries.