Mogul's arrest could herald 'return to Soviet repression'

The jailing of Russia’s richest man in what is widely seen as a politically-driven attack on his oil empire could herald a return to Soviet-style repression that is bound to trigger capital flight, media and politicians warned today.

The jailing of Russia’s richest man in what is widely seen as a politically-driven attack on his oil empire could herald a return to Soviet-style repression that is bound to trigger capital flight, media and politicians warned today.

Mikhail Khodorkovsky, the billionaire head of the nation’s largest oil company, Yukos, was arrested on Saturday by special forces at a Siberian airport.

He was sent back to Moscow, charged with crimes including fraud, tax evasion and forgery, and locked in one of Moscow’s notoriously overcrowded jails, Matrosskaya Tishina.

Yukos shares lost 20% of their value today, leading a steep overall plunge on the Moscow stock exchange, which forced it to suspend trading.

The Russian media and representatives of political and business elite said the arrest, which followed a massive official probe against Yukos that was launched in early July, had dealt a severe blow to Russia’s hopes of economic growth and nascent democracy.

“Capitalism with Stalin’s Face,” blared a headline in the daily Nezavisimaya Gazeta.

“The prosecutor general has been allowed to turn Russia into a VIP jail,” echoed the business daily Kommersant, which warned of the ”KGB-isation of government.”

Many Russian politicians and the media said the investigation had been initiated by senior members of President Vladimir Putin’s administration who share his KGB roots.

Most commentators saw it as a punishment for Khodorkovsky’s political ambitions, in particular his support for several opposition parties in the run-up to the December parliamentary elections.

Russia’s top three business associations, which have toed a careful line throughout the Yukos probe trying not to anger the Kremlin, issued a strong appeal to Putin, urging him to rein in the prosecutors.

“The escalation of the government and law enforcement structures’ action against the Russian business has badly exacerbated the atmosphere in the society,” they said in a joint statement.

Many politicians and commentators described Khodorkovsky’s arrest as a turning point in the long-time struggle between ex-KGB officers in the Kremlin and holdovers from former President Boris Yeltsin’s administration who supported Khodorkovsky, including Prime Minister Mikhail Kasyanov and Putin’s chief of staff Alexander Voloshin.

Many feared that the victory of the ex-KGB wing of the Kremlin would pave the way to their attempt to strengthen their grip on the rest of the business community.

“It will mean that there will be no successful economy, and it’s unlikely that there will be any freedom left in society,” said the popular newspaper Moskovsky Komsomolets.

Russia’s top liberal parties, the Union of Right Forces (SPS) and Yabloko, which have received funding from Khodorkovsky, had said in a joint statement that his arrest threatened Russian democracy.

SPS leader Boris Nemtsov today sent a letter vouching for Khodorkovsky and urging the Prosecutor General’s office to release him.

Deputy Justice Minister Yuri Kalinin said Khodorkovsky was in a cell for five inmates in the Matrosskaya Tishina jail, was feeling fine and had no complaints.

Representatives of Russian and international human rights groups have severely criticised the grim conditions in the jail, where some cells hold more than 100 inmates who must sleep in shifts.

Prosecutors have charged Khodorkovsky on seven counts and accused him of incurring economic damage to the state worth about £590 million – crimes punishable by up to 10 years in prison if he is convicted.

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