Russia has been ordered to pay $51.57 Billion to shareholders of Yukos Oil. Russian officials had manipulated the company's tax to bankrupt it. Its former owner Mikhail Khodorkovsky was an opponent of Vladimir Putin and was jailed in a show trial for fraud and tax evasion. Following its forced bankruptcy, most of the assets were brought by the Russian state owned oil company Rosneft.
The judgement comes from a panel set up by the little known Permanent Court of Arbitration and it's creation was at the prompting of a rather different Russia:
The creation of the PCA is set out under Articles 20 to 29 of the 1899 Hague Convention for the pacific settlement of international disputes, which was a result of the first Hague Peace Conference. At the second Hague Peace Conference, the earlier Convention was revised by the 1907 Convention for the Pacific Settlement of International Disputes. The Conference was convened at the initiative of Czar Nicolas II of Russia "with the object of seeking the most objective means of ensuring to all peoples the benefits of a real and lasting peace, and above all, of limiting the progressive development of existing armaments." The most concrete achievement of the Conference was the establishment of the PCA: the first global mechanism for the settlement of disputes between states. The 1899 Convention was revised at the second Hague Peace Conference in 1907.
There were three claimants who own most of the shares in the now defunct Yukos. The decision was made on July 18 but the proceedings of the arbitration panels are confidential so the outcome has only now become public with the publication of the full judgements. These are available in .pdf format from
this page.
In a separate case, judgement in the European Court of Human Rights is expected shortly in a case brought on behalf of all shareholders.
The case in the ECHR argued that Yukos was unlawfully deprived of its possessions by the imposition of bogus taxes and a sham auction of its main asset. An interim ruling by the ECHR in 2011 found partly in favour of the Russian Federation but invited a claim for 'just satisfaction' from Yukos.
http://www.telegraph.co.uk/...
The forced sale to a state company was on part of an apparent plan by Vladimir Putin to re-establish Soviet style control of the economy. The Washington Post did a piece in February on Igor Sechin, a close associate of Putin who as Rosneft chairman was involved in the appropriation of Yukos.
Sechin is the leading exponent of Putin’s stated determination to restore the state’s role in the Russian economy. Putin used Rosneft, through its acquisitions, to return Russian oil to state control. The company, 69.5 percent government owned, controls about 40 percent of Russia’s crude output.
In a similar vein, Putin reestablished majority state control of natural-gas-exporting behemoth OAO Gazprom. The company had been privatized in the mid-1990s under his predecessor, Boris Yeltsin, cutting the government’s stake to 41 percent.
To develop high-tech industries such as armaments and pharmaceuticals, Putin created Rostec, a state corporation that encompasses 663 companies employing 900,000 people, or 1.2 percent of the entire Russian workforce. He expanded state-run banks OAO Sberbank and VTB Group, whose dominance in retail banking has edged out foreign rivals such as HSBC and Barclays.
The Washington Post estimated that about $420 billion had been pulled from Russia between 2008 and the end of 2013 by investors as a result of the Khodorkovsky affair. A report (
Executive summary .pdf) at the end of 2012 by the European Bank for Reconstruction and Development pointed out the poor state of the Russian economy and its dependence on oil and gas exports. Putin has put in place no plans for when these resources run down and diversification of the economy is hindered by lack of human resources, poor management and corruption. The EBRD estimated that in order to balance its budget Russia needed the price of oil to be $115 a barrel. It is currently $101.30 for West Texas Intermediate Crude futures and $107.01 for Brent (sweet) Crude spot prices.
Yesterday the EU broadened the list of individuals and entities subject to the current sanctions regimen. The BBC is reporting that Downing Street believes agreement will be reached on Tuesday for deeper sanctions to apply to the finance, defense and high tech energy sector. The belief is that the long term effect on the economies of the UK, France and Germany (in the order of the sectors most affected in each country) will be less than the disruption to international trade and commerce from Russia's ignoring the rule of international laws and agreements.
The EBRD last week froze all new investments in Russia. The Russians are already complaining about this as Itar-Tass reports:
Freeze of the financing of new projects in Russia by the European Bank for Reconstruction and Development (EBRD) runs counter to the goals of the international development institutions, Russian Minister of Economic Development and Russian governor in the EBRD Aleksey Ulyukaev said on Saturday.
Such actions based on the European Council sanctions recommendations are unconstructive and “can seriously damage the bank, its customers and long-term interests of all shareholders”, Ulyukaev is quoted in the Ministry’s release as saying at the meeting with EBRD President Suma Chakrabarti.
Such statements are the diplomatic equivalent of screaming and shouting. It shows the degree of the problems Putin has. The much vaunted "gas weapon" of withholding supplies from the EU in retaliation for the sanctions is a myth. Russia simply cannot afford to do without the income. Europe has time to diversify its energy sources. The EU is likely to meet the 2015 milestones towards its 20/20/20 target of reducing CO2 emissions by 20% by 2020 and having 20% of energy from renewables. It has a
roadmap to reduce emissions by 2050 to 20% of the 1990 figure - part of the reason for Putin looking east to sell Russia's gas and oil to China and India.