- The Washington Times - Thursday, September 22, 2005

Russia’s cavalier handling of the Yukos Oil Co. affair, frequently ignoring property rights and the rule of law, will be an issue in negotiations with the United States and Europe over Moscow joining the World Trade Organization, a top European official said yesterday.

Jean Lemierre, president of the European Bank for Reconstruction and Development, told The Washington Times that the Russian legal system’s dismissive treatment of the oil company’s rights has become a matter of concern since Russia moved in the past year to break up the company, seize its assets and jail its former chairman, Mikhail Khodorkovsky.

“I just had a discussion with [Secretary of State] Condoleeza Rice about this. It will be an important part of the discussions of joining the WTO,” Mr. Lemierre said.

“What is key is improvement in the rule of law. Improvements are too slow,” and the judicial system continues to act like an arm of the executive branch, he said.

A State Department spokesman declined to comment yesterday. The department frequently has spoken out about the need to honor property rights during Moscow’s nearly two-year legal wrangle with Yukos and Mr. Khodorkovsky.

A Russian court yesterday reduced the former oil magnate’s jail sentence on fraud and tax evasion charges from nine years to eight.

The United States is negotiating the terms of Russia’s WTO membership bilaterally as well as multilaterally with Europe and other nations. It hopes to complete a bilateral accord this year, addressing issues such as trade in poultry, energy and financial services.

The broader, multilateral agreement — which would open the way for accession to the WTO — may take longer to complete, an administration plete, an administration spokesman said. The European Union reached a bilateral agreement with Russia in May 2004.

Russia’s treatment of Yukos prompted a dramatic drop in investment in the country by Western companies, analysts say, and has killed potential business deals in strategic sectors such as oil, banking and aerospace, where Westerners fear Moscow might move to seize control.

Seeking reform of Russia’s legal system to honor the rights of corporations and investors, which exist in law but often are disregarded by courts in practice, is consistent with the stated U.S. goal of requiring Russia to honor intellectual property rights as part of any WTO accession.

“President [Vladimir] Putin has made WTO membership and integration into the global trading system a priority,” U.S. Trade Representative Robert B. Zoellick told Congress in 2003.

“We will support Russia as it promotes reforms, further establishes the rule of law in the economy and adheres to WTO commitments that support a more open economy. This effort needs to include action by the Duma to establish a fully effective legal infrastructure for a market economy,” he said, referring to Russia’s lower house of parliament.

Mr. Lemierre, whose bank invests more than $4 billion in Russia and Eastern Europe each year, said that although he is impressed with Russia’s economic progress, stability and growth since its financial crisis in 1998, he is not impressed by its legal system.

“Right now in Russia, people see the courts as an element of the fight” between the state and defendants such as Yukos, he said.

But the judges should be impartial “referees” who determine whether parties have complied with contracts and the law, as they are in the West, he said.

“This is a cultural point, and it takes time to change all of this,” said Mr. Lemierre, noting that Russia gained little experience with an impartial judiciary either under its former Communist government or the monarchy that preceded it.

Mr. Lemierre said Mr. Putin was popular in Russia for his harsh treatment of Yukos and Mr. Khodorkovsky, who is disparaged as an “oligarch” there, and that it is clear that after 73 years of state ownership of all property, Russians still do not have a good grasp of the value of private ownership.

Mr. Lemierre said, however, that he has not concluded that democracy is in danger in Russia; it just needs time to evolve.

Staff writer Jeffrey Sparshott contributed to this article.

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