- The Russian stock market plunged as a selling frenzy
reminiscent of the 1998 financial crash erupted among investors shocked
at the weekend arrest of Yukos oil chief Mikhail Khodorkovsky.
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- The benchmark RTS index dived by more than 14 percent
at one point as a sea of red flashed on traders' screens following the
detention, which analysts have called a political witch-hunt of a Kremlin
critic ahead of December elections.
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- At the end of trading, the RTS index recovered slightly,
with a loss of 10.06 percent.
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- The worst hit was Yukos, whose share market capitalisation
shed nearly seven billion dollars, or more than a fifth, triggering a temporary
halt to trading in the shares by stock market authorities.
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- It also crawled back up and ended the day down 15.4 percent
at 12.2 dollars.
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- Soon to become the world's fourth-largest private oil
and gas producer after a merger with smaller rival Sibneft, Yukos has been
a darling of foreign investors and was on the verge of selling a major
stake in the combined entity to either of US oil majors ExxonMobil and
ChevronTexaco.
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- "The arrest, indictment and imprisonment of Mikhail
Khodorkovsky is a disgraceful setback in Russia's post-Soviet development,"
Christopher Granville, chief economist at United Financial Group (UFG)
brokerage in Moscow, wrote in a morning research note.
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- "Everyone is a loser, very much including President
(Vladimir) Putin himself. There is no direct threat to Russia's investment
fundamentals.
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- "But investment and growth can still end up being
undermined by a political crisis which is not brought under control: and
now Russia now finds itself once again in a full-blown political crisis,"
he warned.
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- Analysts have said that the arrest of Khodorkovsky, a
Kremlin critic whose flagship Yukos was the first Russian oil company to
adopt Western accounting practices, would scare off investors from Russia.
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- And on Monday morning, the Financial Times (FT) reported
that ExxonMobil and ChevronTexaco had halted talks on the purchase of a
major stake in Yukos after the arrest of the oil tycoon.
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- In Moscow, Yukos said it had not been informed of any
halt to the negotiations.
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- Khodorkovsky, 40, whose personal fortune is estimated
at eight billion dollars (6.7 billion euros), has provoked anger at the
Kremlin by funding liberal opposition parties ahead of December 7 parliamentary
elections, commentators say.
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- Khodorkovsky was detained at dawn on Saturday by gun-toting
secret service men in camouflage as his private jet stopped to refuel in
the Siberian city of Novosibirsk.
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- He has been slapped with seven criminal charges that
include fraud and tax evasion and is currently being held in one of Moscow's
most notorious prisons.
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- "There will be a massive correction for all companies"
during the coming days, said Steven Dashevsky, head of research at Aton
Capital.
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- Echoing many analysts here, Granville of UFG said that
the campaign against Yukos was orchestrated by former secret service agents
now in power at the Kremlin who had been ordered by Putin to teach Khodorkovsky
a lesson.
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- But now the situation had slipped beyond the president's
control, he warned. "Putin is in a trap of his own making. For having
unleashed his dogs, Putin cannot call them off," said Granville.
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- The ramification of the legal onslaught against Khodorkovsky
-- who like many of Russia's super-rich tycoons amassed his fortune in
dubious 1990s sell-offs of the nation's top mining and energy assets --
stretch far beyond.
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- Investors see the crisis, in which prosecutors and the
courts have acted as tools in a political vendetta, as damning evidence
of an absence of the rule of law and a threat to property rights in Russia.
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- The United States has criticitized the Russian authorities
for applying the law "selectively" against Khodorkovsky and warned
that their actions sent a "very negative signal" to foreign investors.
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