- The Washington Times - Friday, October 31, 2003

MOSCOW — Russia’s prime minister ignored his boss’s warning not to meddle in the prosecutors’ campaign against the oil giant Yukos, saying yesterday he is “very troubled” by the freezing of the company’s stocks.

The comments from Russia’s No. 2 leader appeared to be the boldest sign yet of defiance from within President Vladimir Putin’s Cabinet to an escalating investigation that has stoked financial and political turmoil.

“The arrest of shares of a private company that is traded on the market is a new phenomenon, the consequences of which are hard to define, since it’s a new form of influence,” Prime Minister Mikhail Kasyanov said in the southern city of Nalchik. His remarks were shown on Russian television.

Mr. Putin bluntly warned his Cabinet on Monday against interfering in the prosecutors’ investigation into Russia’s largest oil company and its head, Mikhail Khodorkovsky, who was arrested Oct. 25 by special agents at a Siberian airport.

Mr. Khodorkovsky has blamed the investigation on infighting in the presidential administration, and the split came into the open Thursday when the Kremlin announced the departure of its chief of staff, Alexander Voloshin. Rumors had circulated for days that Mr. Voloshin had resigned over Mr. Khodorkovsky’s arrest.

Mr. Voloshin, like Mr. Kasyanov, was linked with former President Boris Yeltsin’s circle, which was responsible for carrying out the vast privatization of Soviet state assets in the mid-1990s that led to the creation of tycoons such as Mr. Khodorkovsky.

Mr. Putin named Dmitry Medvedev, the first deputy chief of staff and the chairman of the Russian natural gas giant Gazprom, to succeed Mr. Voloshin.

The already 4-month-old Yukos investigation is widely seen as having political overtones. Many in Russia consider it an action staged by some of Mr. Putin’s top lieutenants in retaliation for Mr. Khodorkovsky’s political activities, which included funding opposition parties.

The campaign has heightened fears about instability in Mr. Putin’s government, as different groups jockey for influence, and about the possibility of a broad revision of the privatization program. Mr. Putin has said that won’t happen.

After growing criticism about the seizure of 44 percent of Yukos’ stocks, the Russian prosecutor’s office yesterday lifted a small percentage of the shares that it froze a day earlier. In a statement, prosecutors said they were freeing 4.5 percent of the shares — those belonging to people not under criminal investigation.

Prosecutors also announced they had completed their investigation into Vasily Shakhnovsky, who is a major shareholder in Yukos, for purported tax evasion and turned over their materials to his lawyers.

The Yukos probe, which has also led to the jailing of Platon Lebedev, a top Yukos shareholder and board chairman of the Menatep group, has hurt the Russian stock market and shaken investor confidence. The benchmark Russian trading system, or RTS, closed up 1.9 percent yesterday at 506.12, but it was still down 20 percent from just two weeks ago.

The United States expressed concern again yesterday about the rule of law in Russia and what impact the seizure of Yukos shares and the jailing of Mr. Khodorkovsky would have on investors.

“We think the Russian authorities need to dispel concerns that the Yukos case is politically motivated,” said State Department spokesman Richard Boucher, in the second consecutive day of public criticism by the Bush administration.

“There’s always the issue we see in a case like this as to whether it’s a single event or whether it has some sweeping implication for the rule of law in Russia,” Mr. Boucher said.

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