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Russian Investors Rebound From Panic

The stock market stabilizes after a sell-off brought on by the arrest of the country's richest man. Prosecutors signal they won't back away.

October 29, 2003|Robyn Dixon | Times Staff Writer

MOSCOW — With top officials calling for calm, Russia's markets steadied slightly Tuesday, after the dramatic plunge Monday caused by the weekend arrest of oil tycoon Mikhail Khodorkovsky.

Stocks rose nearly 5% after Monday's panic sell-off caused a drop of about 10%.

Prime Minister Mikhail M. Kasyanov said the situation had been tense.

"We must not panic," he told reporters Tuesday. "We must adopt measures to stabilize Russian financial markets."

Meanwhile, Khodorkovsky remained in a cell totaling five square yards of personal space -- a luxury compared with the conditions given most inmates in Russia's pretrial detention centers. The country's richest man was offered fish soup, stew and boiled barley. He met with his lawyer for several hours and was allowed an hour of exercise.

Khodorkovsky's lawyer, Anton Drel, said he lodged a court appeal Tuesday to release his client on bail. Khodorkovsky, head of the giant Russian company Yukos Oil, was arrested at gunpoint by security agents Saturday in Siberia and faces charges of tax evasion and fraud totaling hundreds of millions of dollars.

In a sign that officials have no intention of letting up their pressure on Khodorkovsky and Yukos, prosecutors succeeded Tuesday in extending the imprisonment of one of the tycoon's close associates, who has been in jail since July and was to be released this week.

Platon Lebedev is a major shareholder in Yukos and chairman of Menatep, the holding company that owns most Yukos stock. He faces charges similar to those filed against Khodorkovsky and now must remain in custody until Dec. 30.

Khodorkovsky's arrest has provoked speculation that the siloviki whom President Vladimir V. Putin has installed in his administration -- former KGB associates from his days as a spy -- have gained the upper hand in a power struggle with more moderate pro-market forces in the Kremlin. The siloviki are seen as the invisible hand behind the moves against Khodorkovsky.

The tycoon's arrest is widely seen as political, with analysts arguing that though many businessmen flouted the laws during the privatizations of the 1990s, Khodorkovsky was targeted because he supported opposition parties. There's also a widespread belief that the arrest of such a big fish wouldn't have been possible without a nod from the president.

Two other tycoons, Boris Berezovsky and Vladimir Gusinsky, went into exile after opposing Putin.

Berezovsky, who recently won political asylum in Britain, predicted in a telephone interview that Yukos shareholders would lose control of the company, suggesting that the siloviki would grab shares.

"Khodorkovsky has chosen his own fate. He will certainly be tried, found guilty and jailed. He has already become a martyr and a hero," Berezovsky said.

"It must be clear to the business elite in Russia now that Putin has betrayed the ideals of democracy and reforms and that business circles must now consolidate their ranks in the collective effort to resist his policy. What Putin is doing now is lethal for business, and it eventually may lead to a civil war," he said.

Igor Y. Malashenko, a close associate of Gusinsky now based in New York, also said he believed that forces in the Kremlin were after a piece of the pie.

"All companies which have a considerable cash flow and yield considerable profits are in serious danger now," he said. "The key word for this new emerging elite is control, and they try to establish it in politics and business. As a result, we will have a classic authoritarian regime."

Times staff writer Sergei L. Loiko contributed to this report.

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