Khodorkovsky Faces More Jail After $29 Billion Russian Oil-Theft Verdict

Mikhail Khodorkovsky, the imprisoned former head of Yukos Oil Co., faces more jail under a new conviction for embezzling $29 billion of crude oil, a verdict that governments in the U.S. and Europe said further weakened the rule of law in Russia.

Khodorkovsky and his former business partner, Platon Lebedev, already serving eight-year sentences for fraud and tax evasion under a 2005 conviction, may be sentenced this week or after Jan. 10 when Russia’s New Year holidays end, their lawyers said. The men face six more years in prison, the defense team said.

“The trial was a charade of justice, the charges were absolutely false, but I fear the sentencing will be very real,” Vadim Klyuvgant, the lead defense lawyer, said yesterday in a statement. The defense team plans to appeal the decision, he told reporters outside the courtroom. “There isn’t the slightest doubt that there was pressure on the court.”

Khodorkovsky, 47, was due for release in October 2011. Once Russia’s richest man, he has called the charges retribution for political opposition to Prime Minister Vladimir Putin, who was president at the time of his 2003 arrest. During Putin’s presidency, Yukos, once Russia’s largest company by market value, was declared bankrupt with about $30 billion of tax claims and sold off in pieces. Putin has denied any involvement.

Photographer: Alexey Sazonov/AFP/Getty Images

Former Yukos Oil Co. executive Mikhail Khodorkovsky. Close

Former Yukos Oil Co. executive Mikhail Khodorkovsky.

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Photographer: Alexey Sazonov/AFP/Getty Images

Former Yukos Oil Co. executive Mikhail Khodorkovsky.

Climate for Business

U.S., German and U.K. officials said the trial undermines confidence in Russia’s commitment to a fair legal climate for business.

The case “raises serious questions about selective prosecution -- and about the rule of law being overshadowed by political consideration,” U.S. Secretary of State Hillary Clinton said in a statement yesterday. The U.S. will monitor the case, and others that have “a negative impact on Russia’s reputation for fulfilling its international human-rights obligations and improving its investment climate.”

The European Union said it was following the proceedings “very closely.”

“The circumstances of the trial are highly worrying and a step back on the country’s way towards modernization,” German Foreign Minister Guido Westerwelle said in a statement.

Richard Ottaway, chairman of the U.K. Parliament’s Foreign Affairs Select Committee, said in a statement that the outcome “has serious implications for the confidence of overseas investors and on British investment in Russia.”

‘Unacceptable’

Russia’s Foreign Ministry said today the U.S. and European criticism of Khodorkovsky’s trial is “unacceptable.” The ministry said the process is a domestic matter and told the U.S. and Europe to stop pressuring Russian courts, according to a statement posted on its website.

Speaking in an annual call-in show with the nation Dec. 16, Putin said “a thief should sit in jail,” referring to Khodorkovsky’s earlier conviction. President Dmitry Medvedev told Russian officials last week to abstain from commenting before the trial is over.

Khodorkovsky’s parents sat in the front row, listening to Judge Viktor Danilkin read the verdict. Supporters gathered in the street chanting “freedom,” and could be heard inside the court. The police detained as many as 20 activists, Interfax reported.

Khodorkovsky’s wife, Inna, said she expected her husband to remain in jail until at least 2012, when a presidential election will be held that could return Putin to the Kremlin for 12 years.

‘Stay in Prison’

“My husband will stay in prison until at least 2012, and after that who knows what will happen? No one does,” she said in an interview with Snob magazine published Dec. 25.

Prosecutors have been seeking a 14-year sentence for Khodorkovsky and Lebedev. The lawyers say time already served on their eight-year prison terms will be deducted from the sentence in the current trial.

The court found Khodorkovsky and Lebedev guilty of stealing 892 billion rubles ($29 billion) of oil, more than the 824 billion rubles the prosecution said was stolen, Interfax reported, citing Klyuvgant. Maxim Dbar, a spokesman for the defense team, said he couldn’t immediately confirm the number. The court may have returned to the charges in the original indictment, Dbar said. During the trial, prosecutors lowered the volume of oil they said was stolen to 219 million metric tons from 350 million tons.

Amnesty International called on the Russian courts to overturn the conviction on the grounds that Khodorkovsky’s trial was unfair and appeared politically driven.

‘Disregard for Due Process’

“The Russian authorities’ consistent disregard for due process in this trial only strengthens the impression that this second round of convictions has been politically motivated,” Nicola Duckworth, the London-based human rights group’s director for Europe and Central Asia, said in an e-mailed statement.

Khodorkovsky’s imprisonment is “one of the irritants that investors traditionally react to,” German Gref, chief executive officer of OAO Sberbank, Russia’s largest lender, said in an interview earlier this month.

“We have our work cut out for us to improve the investment climate,” said Gref, who was economy minister when Khodorkovsky was arrested.

A full conviction and long sentence is priced into the markets, said Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow.

The 30-stock Micex Index retreated 0.7 percent to 1,663.55 at the 6:45 p.m. close yesterday in Moscow, tracking a decline in Asian stocks.

‘A Sideshow’

“Investors already active in Russia have factored it in as a sideshow,” Weafer said in a research note. A reduced conviction would be “positive factor for those strategic and portfolio investors that remain distant from Russia.”

Russia is the world’s most corrupt major economy, according to Berlin-based Transparency International’s 2010 Corruption Perceptions Index released Oct. 26, sliding to 154th among 178 countries and placing it alongside Tajikistan and Kenya.

Khodorkovsky said he’s prepared to die in jail. The verdict will be “predictable,” he said in his closing statement at the trial Nov. 2. “No one believes that you can get an acquittal in the Yukos affair in a Moscow court.”

To contact the reporter on this story: Henry Meyer in Moscow at hmeyer4@bloomberg.net

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net

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