Moscow jitters after new move against billionaire

The Russian stock market, already unsettled by the arrest of Russia’s richest tycoon and the resignation of the Kremlin chief of staff, dived sharply today for the second time this week after prosecutors froze a large chunk of shares in oil giant Yukos.

Reports of the seizure came about an hour before President Vladimir Putin was to meet leading Russian and foreign investors in an apparent attempt to calm financial and political anxiety.

But the news of the Yukos shares seizure pushed the Moscow stock exchange into a steep fall and the benchmark RTS index closed the day down more than 8%. Yukos closed down 14%.

The frozen shares represent 44% of the company’s stock. A statement from the Prosecutor General's office announcing the freeze did not specify what percent of the company they constitute.

The freeze was a new escalation in a four-month-old probe of Yukos, which took a dramatic turn at the weekend when company head Mikhail Khodorkovsky, Russia’s richest man, was arrested and jailed on charges of tax evasion, fraud and forgery.

The arrest, was widely seen as an action staged by some of Putin’s top lieutenants to avenge the tycoon’s political activities, which included funding of opposition parties.

Putin’s chief of staff, Alexander Voloshin, a top Kremlin advocate of big business, resigned in protest at Khodorkovsky’s arrest.

The resignation signals a strengthening of the security-service faction in the Kremlin – connected with Putin from his days as a KGB agent – which appears eager to stem the influence of magnates such as Khodorkovsky.

Khodorkovsky’s jailing has sent Russian stocks down amid investor fears that the Kremlin could launch a broad revision of the results of the privatisation of the 1990s, in which tycoons like Khodorkovsky snapped up prized chunks of state assets at give-away prices in dubious auctions.

Stock traders apparently saw today’s seizure as confirmation of those fears. The move was the first in the probe against property rather than individuals.

“This unlawful approach to the seizure of assets of persons allegedly guilty of some trumped-up charges of inflicting damage will soon allow apartment blocks and individual apartments to be seized,” said Yukos spokesman Alexander Shadrin.