Russia hits back over oil tycoon Mikhail Khodorkovsky

[Keith Millea]

Mike Whitney has a take on this situation.


December 31, 2010 - January 2, 2011
Misjudging Putin

Khodorkovsky's Trip to the Slammer

By MIKE WHITNEY
Vladimir Putin summed it up best when he said, "A thief should sit in jail." Right on. It doesn't matter if he is the richest man in the country or not. If he's done the crime, he's got to do the time. It's that simple.

On Wednesday, Mikhail Khodorkovsky, the former head of Yukos Oil was sentenced to 14 years in prison for embezzling and money laundering. Heads of state, human rights organisations, business leaders, and the entire western media have all protested on Khodorkovsky's behalf, but to no avail. Khodorkovsky will stay in prison where he belongs. Justice has prevailed.

Khodorkovsky's problems began when he challenged an informal agreement with the Kremlin not to intervene in Russian politics. But the oil oligarch thought Putin was weak, so he strengthened his contacts in Washington and dumped money into parliamentary elections. He unwisely assumed that he could defy Putin and extend his tentacles into politics following the model of corporate control he saw in the United States, where the courts, the congress, the White House and the media are all in the pocket of big business. Only he misjudged Putin and ended up in the hoosegow.

According to the Wall Street Journal:

"Mr. Khodorkovsky was arrested on a rented jet in Siberia Oct. 23, 2003, flown to Moscow and jailed on charges of fraud and tax evasion. Just over a year later, Yukos's main subsidiary had been sold at auction to a little-known Russian company that later sold it to the state oil company, OAO Rosneft.
Investors, who watched the market value of Yukos plunge from $40 billion to next to nothing in a matter of months, proved to have short memories. By the summer of 2006, they were lining up to buy stock in Rosneft's initial public offering. The company's main asset had belonged to Yukos."
And, according to Wikipedia:

"Khodorkovsky was charged with acting illegally in the privatisation process of the former state-owned mining and fertiliser company Apatit......In addition, prosecutors conducted an extensive investigation into Yukos for offences that went beyond the financial and tax-related charges. Reportedly there were three cases of murder and one of attempted murder linked to Yukos, if not Khodorkovsky himself....."

When a deep-pocket Robber Barron is charged with a crime, everyone comes to their aid, including "the Italian Parliament, the German Bundestag, and the U.S. House of Representatives". But Khodorkovsky is guilty. The Russian court got it right. The rest is just propaganda.

The portrayal of Khodorkovsky as an "innocent victim of a justice system run amok" borders on the ridiculous. Take a look at this comical article in the Economist ominously titled "The Trial, Part Two". Here's an excerpt:

"The transformation of Mr Khodorkovsky from a ruthless oligarch, operating in a virtually lawless climate, into a political prisoner and freedom fighter is one of the more intriguing tales in post-communist Russia....In this narrow sense, indeed, the imprisoned Mr Khodorkovsky might be compared to the exiled Andrei Sakharov in the 1980s. Both Mr Khodorkovsky and Sakharov, an eminent nuclear physicist, chose a thorny path. And both of these one-time political prisoners then, in effect, took their persecutors and jailers hostage. Just as Mikhail Gorbachev's talk of perestroika, opening up and new thinking, rang hollow until the moment when he allowed Sakharov to come home, so any talk by the Kremlin of the rule of law or about modernisation will be puffery so long as Mr Khodorkovsky remains in jail." (The Economist)

So now the cutthroat scamster Khodorkovsky is Andrei Sakharov? One might think that the Economist would worry that such claptrap would damage its credibility, but apparently not. Apparently, nothing matters quite as much as springing their felonious friends from prison.

The Obama administration has also interceded on Khodorkovsky's behalf even before the verdict was delivered. White House spokesman Robert Gibbs said that the US was troubled by "what appears to be an abusive use of the legal system for improper ends".

"The apparent selective application of the law to these individuals undermines Russia's reputation as a country committed to deepening the rule of law."
Gibbs failed to note how many crooked CEOs or CFOs of major Wall Street firms have been investigated, indicted, prosecuted, arrested, tried, or convicted?
So far, that number is zero. So much for the Obama administration's commitment to the rule of law.

Secretary of State Hillary Clinton also put in her two-cents saying that a conviction would have a "negative impact on Russia's reputation."
Right. This is the same Hillary Clinton who has thrown her support behind the Patriot Act, the intrusive/illegal TSA "pat downs", the limitless detention of terror suspects, increased surveillance of US citizens, and the de facto repeal of habeas corpus.

Clinton's credibility on civil liberties is zilch.

Imagine what it would be like to live in a country where the rich had to play by the same rules as everyone else? Presumably, one would have to move to Russia. There is no expectation of justice in the US today. None.
Khodorkovsky was convicted because he's a crook and because the Russian justice system is less corrupt than the one in the US. His incarceration is a victory for the people who want to see the law applied fairly regardless of how rich someone is.

Mike Whitney lives in Washington state. He can be reached at fergiewhitney@msn.com

http://www.counterpunch.org/whitney12312010.html

[David Guyatt]

The background to the Yukos story seems to me to be a classic case of a battle between certain western nations oil interests (notably ConocoPhillips) and Russia interests to control Russian oil assets.

There were all sorts of background spook machinations (American and German to my personal knowledge) involved in this game prior to Putin taking effective control and putting Khodorkovsky in the slammer.

Thereafter the message went out:

"Houston, we have a problem".

[David Guyatt]

ooh, er. I just had a thought.

You don't think...

Nah.

But knowing how long it takes to negotiate a deal of this size before bringing it to market, you don't suppose that the BP blowout in the Gulf of Mexico is in any way related?

Nah.

Couldn't be.

Texan oil companies are internationally famous for their purity and above-board honesty to engage in any sort of covert hanky-panky.

American hostility grows over BP's deal with Russian state oil company

American hostility grows over BP's deal with Russian state oil company
Politicians voice fears over Alaska pipelines, Gulf payouts and risk of Kremlin influence on major supplier to US military

Andrew Clark and Tim Webb
The Observer, Sunday 16 January 2011


BP's chief executive Bob Dudley, front left, energy secretary Chris Huhne, centre, and Rosneft's chief executive Eduard Khudainatov, front right, at the announcement of the Arctic alliance on Friday. Photograph: Sean Dempsey/PA
Britain's leading oil company, BP, is facing hostility and suspicion from the US over an alliance with the Russian state oil firm Rosneft that opens up vast areas of untapped wilderness off the coast of Siberia and beneath the Arctic shelf.

Endorsed by both countries' prime ministers, David Cameron and Vladimir Putin, the tie-up gives Rosneft a 5% stake in BP, while the London-based company will increase its stake in the Russian firm from 1.3% to 10.8%. It will give the Kremlin a slice of ownership of BP's global operations, which stretch from Alaska to the Gulf of Mexico, north Africa, Azerbaijan and the North Sea.

BP's chief executive, Bob Dudley, hailed the arrangement, signed on Friday night, as a "historic moment for Rosneft, the BP and for the global energy industry generally", and described it as a "new template" for the way international oil exploration can take place. Russia's deputy prime minister, Igor Sechin, who chairs Rosneft, suggested that among BP's attractions were "knowledge and experience" accrued from last year's disastrous Deepwater Horizon oil spill in the Gulf of Mexico.

The move, which involves BP issuing 988m new shares to Rosneft worth £4.9bn, has gone down badly in the US, coming just days after a presidential commission published a damning report on the blunders leading up to the Deepwater spill. In Washington, the US state department is facing calls to investigate whether the Russian government's links with BP posed national security issues.

"There are various different levels where this deserves some analysis and some scrutiny," said Michael Burgess, a Republican congressman who sits on the House energy and commerce committee. "BP is one of the biggest suppliers to our military. Are there national security implications to this deal?"

Burgess pointed out that BP runs sensitive trans-Alaskan oil pipelines and that the group's BP America subsidiary is regulated as a US company. Comparing the deal to the blocked purchase by Dubai Ports World of P&O's US ports in 2006, he called for an inquiry by the US government's committee on foreign investment, which is chaired by treasury secretary Timothy Geithner and has a mandate to scrutinise potentially threatening financial incursions into the US.

His remarks followed comments by a Democratic congressman, Ed Markey, who suggested BP now stood for "Bolshoi Petroleum" and claimed that the Rosneft tie-up could complicate the collection of compensation for the fishing industry hit by the Deepwater spill.

BP's eastward manoeuvre puts the British company in pole position for exploration of more than 125,000 sq km of potentially oil-rich seabed beneath the South Kara Sea off the coast of western Siberia an area the size of the North Sea. The Russians are keen to get their hands on BP's technical expertise, and co-operation will be extended to ventures off the north-eastern frontier of Siberia and even in oil refineries in Germany. The two partners will establish an Arctic technology centre to develop new techniques for the safe extraction of oil.

"This has the blessing of the Russian government for BP to get access to some additional resource," said Philip Weiss, an energy analyst at Argus Research. "Because of the uncertainty in the Gulf [of Mexico], that's probably even more important for BP."

Any exploration in the Arctic, however, will face opposition from environmentalists. Charlie Kronick, senior climate adviser to Greenpeace, said: "There's a view from the oil industry, and from governments too, that we absolutely have to go for every last drop of oil, regardless of how damaging it is to get out."

Pointing to the Russian government's 75% stake in Rosneft, he added that politics and business are "very, very closely bound" in Russia, which could put BP in a sensitive position in the event of future posturing on energy by the Kremlin, which cut gas supplies to Ukraine two years ago in a dispute over pricing.

BP's links to Russia go back two decades. It already operates a joint venture there TNK-BP although Dudley has a chequered personal history in the country: he left in 2008 after having his work permit revoked following a bitter dispute with local partners. Dudley played this down at Friday evening's signing ceremony: "I never regarded my experiences at TNK-BP as anything other than an extended business discussion."

Russia's prime minister has adopted a sympathetic view over the Deepwater spill. Sources say Putin was angry about BP's treatment by US politicians and was supportive of Dudley's predecessor, Tony Hayward, who lost his job over a string of ill-considered remarks, including a comment that he wanted to get his "life back" in the wake of the disaster, which killed 11 people.

Putin said this weekend that he did not consider BP solely to blame for the incident: "Our experts have scrutinised the tragedy: we know that BP was the organiser of the project, but there were also eight subcontractors, including major US companies."

Analysts say having the Kremlin on board would make it harder for another company to take over BP, which is selling off assets partly in response to the spill. It emerged this month that Shell discussed launching a takeover bid last summer should a US rival table an offer for BP.

Public vitriol could prompt Congress to call hearings over BP's tie-up with Rosneft. But some have expressed cynicism over the motivation for the outrage. "Sometimes politicians say things that make no sense," said Fadel Gheit, an oil analyst at Oppenheimer & Co in New York. "Has Russia declared war on us? Not to my knowledge."

The energy secretary, Chris Huhne, took part in handshakes to mark the agreement at BP's London head office. Huhne said that Russia accounts for nearly a fifth of the world's gas production and 13% of global oil output, which, he said, was vitally important in the medium term despite the government's aspiration to a low-carbon future.

"BP, as well all know, is coming out of a difficult period in its history," said Huhne. "This partnership shows BP is very much open for business."

[David Guyatt]

Crooks squabble continues...

http://www.guardian.co.uk/business/2011/...s-dividend

Court order halts BP talks with Rosneft

TNK-BP partners succeed gaining injunction
BP makes first annual loss since 1992
Firm sets aside $41bn to cover spill costs
Half US refining capacity, including Texas City, to be sold
Fourth-quarter dividend of 7 cents in line with expectations

Tim Webb and Tom Bawden
guardian.co.uk, Tuesday 1 February 2011 20.18 GMT


Workers in Louisiana clear oil from beaches after the explosion of BP's Deepwater Horizon rig Photograph: Stuart Franklin/Stuart Franklin/Magnum Photos

BP was today forced to put on hold its controversial new alliance with Kremlin-controlled oil company Rosneft after its rival Russian partners won an injunction against the proposed deal.

After a day of drama in the high court, the billionaire oligarchs who own half of BP's existing TNK-BP Russian joint venture, won an injunction preventing the UK oil major from completing its share swap with Rosneft. It is also banned from continuing negotiations about forming a joint venture to explore the Russian Arctic together.

BP will now start formal arbitration proceedings in Sweden within days in an attempt to resolve the dispute with the billionaires' AAR consortium.

BP's new chief executive Bob Dudley, who earlier today announced that BP would resume dividend payments for the first time since the Gulf of Mexico spill, suggested TNK-BP could still be offered a role in its new Rosneft alliance: "We were always intending to offer them the opportunity. There may be a resolution, a financial or strategic decision for TNK-BP."

But the court injunction, coming a day after AAR voted to withhold TNK-BP's $1.8bn (£1.1bn) dividend in protest over the Rosneft deal, has dealt a major blow to Dudley's attempts to remould BP.

The injunction applies until 25 February. If arbitration, a procedure outlined in BP's shareholder agreement with AAR, does not resolve the dispute, the Russian oligarchs plan to apply for an extension to the injunction. Stan Povolets, chief executive of AAR, said that the court decision "confirms the moral and legal justification of our position".

AAR claims that the Rosneft alliance contravenes its shareholder agreement which it says requires BP to offer TNK-BP first refusal on any business opportunities in Russia.

The developments overshadowed BP's annual results, which were also unveiled today. The company announced a loss of $4.9bn for the year, its first loss for 19 years because of the Gulf spill costs. The estimated cost of the spill has risen by $1bn to $40.9bn.

BP also said it would restore a dividend payout. However, the fourth-quarter payment will be 7¢ a share, half the level before last April's Gulf spill. Because BP and Rosneft have not completed the share swap, neither will be entitled to receive each other's dividends.

Dudley said that BP would sell half its refining capacity in the US as the company focuses on exploration. The refineries to be sold are Carson in California and Texas City, where 15 workers died in an explosion in 2005. He also scrapped BP's old production targets, saying the company would focus on "quality not quantity".

At a press conference Dudley attempted to downplay the dispute with AAR.

"We have and we are going to meet all our obligations in the shareholder agreement. I've said let's go for arbitration as fast track as you like. I continue to think this is a commercial matter which will be resolved in a business way."

Dudley admitted that AAR was "very surprised" when the share swap with Rosneft was announced, the details of which had to be kept secret because they were share price sensitive, he said. He added that details of the Rosneft alliance were sent to AAR last Thursday almost two weeks after the deal was unveiled.

Sources close to AAR said tonight that the documents contained no new information beyond what BP had already disclosed to the market.

Dudley added that TNK-BP, which accounts for about a quarter of BP's total production, did not have the skills or expertise for offshore drilling. It is thought that the agreement with Rosneft gives BP two years to hold exclusive negotiations with the Russian company about exploring the Arctic.

Dudley also responded to leaked US embassy cables, published by the Guardian, which reported that BP's top executive in Russia predicted that the TNK-BP subsidiary would be carved up by the end of this year by Rosneft and fellow state controlled energy company Gazprom: "I do not have those fears. All I can promise is my belief that that won't happen."

Dudley said that BP was seeking "new kinds of relationships" with national oil companies with access to large oil and gas reserves. He pointed out that international oil companies like BP now only had access to 9% of the world's oil and gas reserves compared to 90% in 1970. "The role of an international oil company [IOC] is taking technical know how … and working with NOCs [national oil companies]. If an IOC can't do that it does not have a future."

He denied that alliances such as the Rosneft deal exposed BP to new and greater political risk. "We have a partnership with a state controlled company Rosneft. Some people may say that is not a basis for risk. There are lots of risky countries where oil companies operate."

He also added that the company would continue to pump more oil than gas which would distinguish it from rivals like Shell which will soon be producing more gas. The International Energy Agency says that "big oil" companies are having to reinvent themselves as gas producers because many governments are denying them access to develop their oil resources.

Gulf legacy ever present

BP's latest Russian adventure has at least shifted some of the attention away from last April's Gulf of Mexico disaster. But the legacy remains ever present, despite Dudley's attempts to draw a line under the affair that led to his taking charge after the departure of Tony Hayward.

Today, Dudley committed BP to spending more on deep water exploration, including in the Arctic. Asked if this was appropriate, given the Deepwater Horizon explosion, Dudley said BP would be "irresponsible" not to apply the lessons it says it has learned.

"After the events of the Gulf of Mexico spill, BP has a choice of stepping back and saying 'we lose confidence and we lose the ability to operate this [deep water] technology'," he said. "We do not think this is right. We think it would be even irresponsible not to take these lessons into the company's operations and into other companies around the world."

The number of barrels of oil that spewed into the Gulf also remains to be resolved. Tony Hayward got into hot water when the Guardian reported his comments that the amount was "relatively tiny" in relation to the "very big ocean".

The US government later released an estimate from scientists of 4.9m barrels, which would make it the world's largest offshore accidental spill. BP is contesting this number.

Dudley said BP believes the amount of oil flowing rose as the company removed debris in the attempt to cap the well. "No one exactly knows what the estimate of the spill will be," he said. BP would need to examine the blow-out preventer to get a more definite answer. If the official estimate is reduced, the fines on BP partly on a per-barrel basis will be reduced.

[Magda Hassan]

Cyril Tuschi, photo Lucy Komisar

The final edit of a film about the jailed Russian oligarch Mikhail Khodorkovsky, a film to which I contributed, was stolen Thursday from the offices of German director Cyril Tuschi.
The documentary, "Khodorkovsky," is to have its world premier at the Berlin International Film Festival Feb. 14. I did reporting for the film and also was video-interviewed for it.
It was the second theft. A few weeks ago, when Tuschi was in Bali on a working vacation to finish the film, his laptop with the version he was editing was filched from his hotel room.
The movie, mostly in English, tells Khodorkovsky's story from his days in the Communist youth, where he got the cash to set up a bank, to the build-up of his oil empire and his political challenge to then President Vladimir Putin. Putin had told the "oligarchs," men who had stolen the Russian patrimony to build their wealth, that he wouldn't bother them as long as they stayed out of politics. Khodorkovsky, however, sought to influence the Duma election. He was arrested in 2003 and then tried and jailed for tax evasion.
The film is generally sympathetic to Khodorkovsky, with a lot of footage of his family, friends and associates (I think he overdoes that) and an extraordinary interview that Tuschi got while his subject was in court. It also includes interviews with people who explain that the man was really a crook. Not enough of that. I would have been tougher.
Based on my research and evidence, Khodorkovsky did indeed get his Yukos oil empire by fraud and also evaded taxes. So did many other current titans of industry who made their deals with Putin and were not targeted.
The former Berliner Handwerker Verein, photo Lucy Komisar

Two computer hard drives and two laptops with the final version of Tuschi's film were stolen Thursday night from his offices in an old brick building near the popular Hackescher Markt in former East Berlin.
The complex was once the Berliner Handwerker Verein (Berlin Craftsmen's Association), its name in a relief above the front gate, and a grubby back building has four or five floors of spaces used by film makers and other artists. Because so many people have keys to the building and come and go at all hours, it is not very secure. Berlin police are investigating.
The Berlin International Film Festival has an earlier version of the film, without German subtitles, which it will screen if the later copies are not recovered.
Khodorkovsky, who was to be released this year after eight years in prison, was just sentenced to another six years behind bars. That makes the film timely, but also a target for interests who want it suppressed.
http://thekomisarscoop.com/2011/02/a-rus...len-twice/

[Jan Klimkowski]

The film is generally sympathetic to Khodorkovsky, with a lot of footage of his family, friends and associates (I think he overdoes that) and an extraordinary interview that Tuschi got while his subject was in court. It also includes interviews with people who explain that the man was really a crook. Not enough of that. I would have been tougher.
Based on my research and evidence, Khodorkovsky did indeed get his Yukos oil empire by fraud and also evaded taxes. So did many other current titans of industry who made their deals with Putin and were not targeted.

Hmmm - so who stole the film?

Russian goons?

Or Khodorkovsky's goons?

It also sounds like a technically illiterate theft. To steal a "film", in today's world of digital editing, the thieves would need to steal the master source films and tapes. Stealing a cut film is a huge and expensive irritation for the filmmakers, but so long as a back up of the digital edit code is saved somewhere, the finished film can be reconstituted.

Bizarre.

Which begs the question: is this simply a marketing ploy?

[Magda Hassan]

I wondered if it was that too Jan. Or perhaps some one just wanted to make sure what was in it before everyone else got to see it. Forewarned as to it contents. But yes, bizarre.

[Jan Klimkowski]

I wondered if it was that too Jan. Or perhaps some one just wanted to make sure what was in it before everyone else got to see it. Forewarned as to it contents. But yes, bizarre.

Yes - I agree.

If it was stolen, then this wasn't to suppress the film for the reasons I articulated in post #16.

So, the two main possibilities are presumably that the digital cut was stolen so that a certain party (eg Russian intelligence) had detailed advance knowledge of its contents, or that it's a marketing ploy to increase the notoriety (and presumed truthfulness) of the film.