Putin faces growing crisis over oil shares seizure

RUSSIA’S prime minister said yesterday he was deeply concerned by the seizure of shares of oil giant YUKOS — the closest any top official has come to publicly criticising the Kremlin’s handling of the crisis.

“I will refrain from any assessment but my concern is great,” Prime Minister Mikhail Kasyanov said, a day after prosecutors froze a major stake in oil giant YUKOS and a top presidential aide quit in protest.

It has handed President Vladimir Putin his biggest political and economic crisis in three years in power and raised fears in the West over the future of economic reform.

Russian markets regained some ground after Mr Putin told bankers he was committed to a market economy, but shares were still far below levels before the gunpoint arrest of YUKOS boss Mikhail Khodorkovsky on charges of fraud and tax evasion.

Mr Kasyanov, who sides with the pro-business elite that is pitted against Kremlin hardliners, said the seizure of the shares of a publicly listed firm was “a new phenomenon, whose consequences are difficult to define”.

Mr Putin faces calls from business, the media and politicians to rein in prosecutors and send a clear signal the YUKOS campaign would not spread to other businesses.

“The president should open his eyes and finally discover that prosecutors are destroying in one day what took years to create,” leading business daily Vedemosti said in an editorial. “Business can react to such a development only by shutting down.”

On Thursday, prosecutors froze a controlling stake in YUKOS owned by Mr Khodorkovsky and his allies in a dramatic escalation of what is seen as a drive by Kremlin hawks to quash his political ambitions and reassert the state’s authority over business.

Then Mr Putin replaced chief of staff Alexander Voloshin, seen as the main counterbalance to the hawks and sympathetic to ‘oligarchs’ like Mr Khodorkovsky who made huge fortunes in the sell-off of state assets under former president Boris Yeltsin. Mr Voloshin is the most senior official to quit under Putin.

Kremlin hawks are worried by the political ambitions of Mr Khodorkovsky who openly backed Mr Putin’s liberal opponents in parliamentary elections due in December and was thought to have his eyes on the presidency.

A European minister who recently met Mr Putin told Reuters: “Putin said Khodorkovsky crossed the red line by using money to buy votes. His will is to demonstrate that the oligarchs can enjoy their unique situation if they stay out of politics.”