Wednesday, August 23, 2006

Yukos: Moscow Extradition Threat to U.S. Businessman

Moscow continues to slowly ratchet up its campaign against the West, and particularly against U.S. and British interests around the world. Its latest efforts focus on the oil company Yukos, and involve an oil blockade of Lithuania.

Yukos founder Mikhail Khodorkovsky is currently serving a nine-year sentence in a penal labour camp essentially for having presented a political challenge to the Kremlin. Now U.S. citizen Stephen Theede, former Yukos chief executive, says that he is being threatened with extradition to Russia if he moves outside the U.S. or Britain.

Stephen Theede resigned from Yukos last month, after the company was declared bankrupt by the Russian authorities. Then last week the Prosecutor General in Moscow launched a criminal case against him and threatened the other Yukos executives, accusing them of stealing the company's foreign assets, principally an oil refinery in Lithuania. Vladimir Socor has a detailed analysis of the current Russian oil blockade of Lithuania here. It's an alarming situation that, as Socor says, is being almost totally ignored "by Western believers in Russia’s reliability as an energy supplier."

Interviewed on BBC Radio 4's Today programme, Stephen Theede had the following to say:

We're just appalled at these accusations. First of all, they announced last Thursday that they were going to initiate an investigation into our international assets. The fact of the matter is that company management did set up a foundation in early 2005 to protect our international assets from expropriation by the Russian Federation. And that came on the heels of the expropriation of our largest Russian asset Yukosneftegaz, in late 2004, and it was after that that we concluded there was absolutely nothing we could do to save our Russian assets if the Russian authorities wanted to take them. But we felt we had a strong fiduciary responsibility to take steps to protect the assets that we could protect, and that was our international assets. And so using a long known technique in the Netherlands, we set up a foundation to protect these assets from unfriendly hands.

What about the criminal case that's actually being brought against you? Are you going to fight it, or are you simply going to ignore it?

We're not going to sit on our hands. This is just an amazing move that the Russian authorities have taken, to open an investigation against individuals who are not residents of Russia. They are trying to impose their will on those of us who have spent the last two years doing nothing but trying to do the right thing in protecting the interests of the company. And it brings up, I think, an important point of what I've discovered in the time I've been in Russia, and that is that even though my principles have always been to always do the right thing, time after time, but in Russia today the key to success is more doing what the authorities want you to do rather than doing the right thing.

Do you feel extremely bruised by this whole process?

I just feel angry about this whole process. What complicates it for me personally is I see things that go on in Russia that would be considered illegal in any country in the West, and the results of these illegal activities are then in essence exported to Western countries and the actions that were taken in Russia seem to be forgiven and ignored and overlooked. It's just creating a Russia that is becoming more and more confident that they don't need to comply with Western standards in order to be accepted and get along in the West. And I think it's creating a much harder Russia, I think it's creating a Russia that's going to be increasingly more difficult to deal with - where does it all stop?

You resigned last month as chief executive of Yukos. What do you see your role being now?

Well, I resigned all of my responsibilities with Yukos as president as well as on the board of directors of Yukos Oil Company. I want my role to be reduced substantially to the point where I can put the Yukos saga behind me and move on, with my life. It would appear that the Russian authorities are going to make it difficult for me to do that, at least for a while. The fact that they've announced an investigation may or may not allow them to invoke certain extradition treaties that are in place with a number of European countries. I don't know how serious a threat extradition might be - just my motto here is going to be for a while better safe than sorry, so my travels will be restricted mainly just to the UK and the US. Outside of that I will probably be very, very careful.

Update: In the Washington Post, Peter Finn has a report on the same story. An excerpt:

"We have worked every day to do the right thing, but in Russia doing the right thing isn't what they're looking for," Theede said. "What they're looking for is doing what they want you to do. We're caught in this completely impossible situation where for us, doing the right thing is defending the company from the Russian authorities' attack on it. But if we fulfill our fiduciary responsibility, we are going to be on the wrong side of the fence from the Russian authorities."

The other claimant in the Dutch courts is Rosneft, Russia's state-owned oil company, which acquired Yukos's prime asset at an auction that Theede and others said was rigged. Theede and other Yukos executives unsuccessfully attempted to prevent Rosneft holding a public offering that raised billions of dollars in London earlier this year. Rosneft has pushed for Yukos's liquidation in Russia, and it is expected to snap up most of its remaining assets in the country when the bankruptcy is finalized.

"We felt that it was our responsibility to protect our international assets; I mean that's what management does when they are under unfriendly attack or facing a takeover," Theede said. "We established the foundation they referred to in order to provide protection for the assets and begin a sale process so that legitimate creditors could be paid."

And that includes Rosneft, but also Group Menatep, he said.

The Russian authorities are unlikely to succeed in prosecuting Theede and the others. Foreign courts, including those in London, have repeatedly refused to extradite Russian employees of Yukos to Moscow in earlier cases. But that is little consolation to Theede.

"Many, many people have told me, 'Consider the source; we know this can't be right,' but there are going to be people who don't fully understand, read these things and wonder," Theede said. "I've never had to face a situation like this in my life and I'm quite angry."

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