Skip to main content

Yukos win delivers blow to Russia's Putin

By John Defterios, CNN
updated 5:33 PM EDT, Mon July 28, 2014
STORY HIGHLIGHTS
  • A court decision awards $50 billion to now-defunct Russian oil giant Yukos' former shareholders
  • The case has been rumbling for almost a decade, after Yukos assets were expropriate by the state
  • The win is seen as a blow to Russian President Vladimir Putin, whose relations with the West are strained

Editor's note: John Defterios is CNN's Emerging Markets Editor and anchor of Global Exchange, CNN's business show focused on the emerging and BRIC markets. Follow John on Twitter.

(CNN) -- The brand name Yukos no longer exists and its former founder Mikhail Khodorkovsky has left Russia after being freed from jail, but a landmark ruling in the Hague released Monday ensures their legacy will live on during a sensitive period of time for Vladimir Putin.

Yukos was one of Russia's oil giants through the 1990s and until the early 2000s, when its assets were expropriated by the state after a political battle with Khodorkovsky.

Now the Permanent Court of Arbitration, in what is considered a landmark judgment, has ordered payment of damages to its former shareholders, totaling $50 billion and including interest and fees for violation of a treaty covering Russia's energy assets.

This case goes back to 2005 and strikes at the heart of Putin's tactics to strip Yukos and Khordorkovsky under charges of tax evasion.

Khodorkovsky: I don't know why I'm free

The three judge panel called the Federation's move "equivalent of expropriation of claimants' investments." Those claimants, representing Group Menatep Ltd. or GML, include former Yukos CEO Platon Lebedev and four others who were seeking damages of up to $114 billion.

Khodorkovsky not ruling out politics

The main asset of Yukos, known as Yuganskneftegaz, was auctioned in late 2004 for just $9.3 billion and purchased by state-run Rosneft, which is now run by Putin confidant Igor Sechin.

Mikhail Khodorkovsky: I've got an iPad

The Russian president has big plans for Rosneft to be one of the top energy players in the world. It now has an enterprise value of $115 billion, but that is just a start with agreements signed with Exxon-Mobil, ENI of Italy and its largest shareholder BP, which has a 20% stake in the group.

Rosneft holds the position that it did not participate in the arbitrations and therefore is not bound by the rulings. In a statement it said, "Rosneft believes that all of its purchases of former Yukos assets, and all other actions taken by it with respect to Yukos were entirely lawful and proper applicable law."

The response from Russia's Foreign Minister Sergei Lavrov during a press conference Monday was equally unforgiving about the actions taken.

"The process is not over; appellations are allowed," Lavrov said. "The Russian side, as well as agencies representing Russia in this trial will use all available legal possibilities to defend their stance."

This ruling comes as Moscow faces intense scrutiny for its support of the ongoing fight by pro-Russian rebels in eastern Ukraine. Another round of European Union economic sanctions are pending after Washington proceeded to tighten the noose earlier this month.

Khodorkovsky was not part of this case, but an attorney who represented the former oligarch during his trial on charges by the Russian state said the ruling serves as a partial vindication for his former client.

According to Robert Amsterdam, "this is a very important decision to be read by all those who lose assets to autocrats." The arbitrators, he said, had "very heroically" cut through "mistruths" to find in favor of the claimants.

This ruling could not only influence Western-led sanctions on Moscow, but could potentially strain talks to find common ground between Russia, Ukraine and the European Union over future gas supplies into Europe.

READ MORE: Khodorkovsky speaks out

READ MORE: Sanctions: Top 10 Russian targets

ADVERTISEMENT
Part of complete coverage on
updated 4:04 AM EDT, Thu October 9, 2014
Liberia, Sierra Leone and Guinea -- the three countries facing the biggest health crisis -- are also facing huge bills to try and contain the virus.
updated 9:16 AM EDT, Mon September 22, 2014
Twitter has lost its position in the top 20 coolest brands for the first time in three years.
updated 11:54 AM EDT, Thu September 25, 2014
As the crisis in Iraq escalates, CNN looks at how Iraq could crack down on ISIS' oil riches under the guidance of its new oil minister, Adel Abdul Mahdi.
updated 4:42 AM EDT, Fri August 29, 2014
Recep Tayyip Erdogan is Turkey's new president . So can he revitalize its economic fortunes?
updated 1:24 PM EDT, Fri September 19, 2014
Experts share their tips on cities they see as emerging financial hubs...they're not where you think.
updated 11:11 AM EDT, Thu October 9, 2014
Growing numbers of us are willing to serve as bank, teacher or travel agent to people we have never met, and entrust them to serve us in turn.
updated 8:44 AM EDT, Thu August 28, 2014
The European Union is stepping in to save its dairy from going sour.
updated 8:36 AM EDT, Mon August 18, 2014
Europe's deteriorating relationship with Russia has hit the region's growth, even before new food sanctions begin to bite.
updated 12:34 PM EDT, Wed July 16, 2014
With cyberattacks on the rise and here to stay, it's a modern-day challenge for people and businesses to get smarter about preventing them.
updated 9:24 AM EDT, Thu August 14, 2014
Airstrikes, rebels seizing control of oil fields, plus a severe refugee crisis are a recipe for market panic. So why are Iraq oil prices stable?
updated 7:24 AM EDT, Fri September 19, 2014
Peer-to-peer finance lets businesses bypass bank loans. Creative companies with quirky ideas find new lending models advantageous.
updated 11:24 AM EDT, Sun July 20, 2014
Evidence points to pro-Russian separatists as perpetrators of the attack and Vladimir Putin is facing questions, David Clark writes.
updated 5:52 AM EDT, Wed September 3, 2014
CNN's Jim Boulden looks on the future of online shopping.
updated 10:40 AM EDT, Tue August 5, 2014
The biggest Ebola outbreak in history is taking its toll in Western Africa, hitting some of West Africa's most vulnerable economies.
ADVERTISEMENT