By Rodolfo Ragonesi, Times Malta, December 4, 2017 published: “In the 1990s Menatep was then hurled to notoriety when it became the centre of a huge money-laundering scandal involving several banks, with the funnelling of $15 billion to the Bank of New York by Russian mobsters”.
“Mikhail Khodorkovsky is an interesting character. In 2016, Khodorkovsky, who had been jailed for tax evasion and money laundering, and released early on a Winter Olympics amnesty, lost an appeal at the Hague where he had sued the Russian government for an alleged breach of the Energy Charter. The appeal court overturned the first ruling that had set damages at a huge $50 billion because Russia had in fact never ratified the Energy Charter Treaty in the first place.
Khodorkovsky, born of a Jewish father and Christian mother, had started out as a fervent Communist youth leader, before he decided to convert to the virtues of capitalism. He wrote a manifesto entitled The Man with the Ruble, wherein he stated irreverently that: “Our Lord is His Majesty, Money, for it is only He who can lead us to wealth as the norm in life.” Nothing like a convert to evangelise with the utmost financial fanaticism.
Khodorkovsky started from nothing to set up one of Russia’s first post-communist private banks in the late 1980s, named Menatep. He promptly used his clients’ deposits and extensive State funds deposited as part of a compensation to Chernobyl victims, as the bank’s collateral, that permitted his own bank to extend to him huge unsecured loans to kick-start his new companies.
In the 1990s Menatep was then hurled to notoriety when it became the centre of a huge money-laundering scandal involving several banks, with the funnelling of $15 billion to the Bank of New York by Russian mobsters.
In 1993, President Boris Yeltsin made Khodorkovsky Deputy Minister of Fuel and Energy of Russia. He then set about organising the largest oil heist in history. He devised a scheme for banks, including his own, of course, to give the government loans against collateral made up of shares companies holding Russia’s most valuable assets like oil and gas. This was made possible by one of Yeltsin’s Presidential decrees, without any approval by the Russian Parliament.
In 1995, with oil companies struggling with record low oil prices, the oil giant Yukos was auctioned off, with Khodorkovsky’s Menatep Bank wearing two hats, acting as both auctioneer and bidder. Can a farce be greater than this? Yukos, estimated to be worth around $5 billion, even with such low oil prices, was purchased by Menatep for a ridiculous $300 million.
Apparently this manipulation of public assets had not been factored into the first court’s ruling at the Hague. In its overturned judgement, it had somehow quantified damages at a record breaking $50 billion for the dispossession in 2003 of assets acquired under most dubious circumstances for $300 million in 1995. Wow! Sounds fair!
Damages were put at 167 times the purchase price. Put into perspective, had it not been quashed on appeal, Russia would have been ordered to pay the equivalent of quarter of its entire public spending. Maybe the farce can get bigger after all.
It transpires, furthermore, that Menatep had become insolvent by 1998, incapable of repaying loans from other banks taken to pay the $300 million for a company worth 20 times that amount. So Khodorkovsky registered Menatep in the tax haven of Gibraltar and funnelled assets out to avoid seizure in Russia, while seeking to sell off a large part of Yukos, which was paying far less in tax than what oil companies were paying in Russia.
Aleksei Pichugin, the security chief of Yukos, was condemned to life imprisonment for complicity to the murder of three individuals, including mayor Vladimir Petukhov. Petukhov had been pressing for Yukos to pay more in taxes. In December, 2015 a Russian court issued a new international arrest warrant for Khodorkovsky, who had been pardoned in 2014 after serving nine years in prison. The warrant is for charges of ordering the murder of Petukhov.
By 2003, just before his arrest, Khodorkovsky had turned from communist to Deputy Minister for Energy and banker to become the richest man in Russia and 16th wealthiest in the world, all in just 10 years. He was negotiating with American oil giants Chevron Texaco and Exxon Mobil for the struggling Menatep to sell its large stake in Yukos, which accounted for 20 per cent of Russian oil and gas production, equivalent to the entire oil output of Libya or Iraq.
Those oil men and bankers in the UK and the US had got so very close to getting their greasy hands on Russia’s oil. So close and yet so far
Khodorkovsky was also negotiating a merger with Siftnet, another privatised Russian oil giant, valued at around $3 billion when it was auctioned off to Boris Berezovsky in the 1995 heist, for a ridiculous $100 million, while Yeltsin was busy helping himself to another bottle of vodka. Khodorkovsky was now essentially trying to sell off Russia’s large oil companies to the US oil giants.
Yukos had already filled its board with American heavyweights by the late 1990s, in preparation for the sell-out, as part of an ‘adventure’ to bring American oil men onto Russian soil and into their oil wells. Seymon Kukes, an American of Russian origin, became its CEO. He was also president of Russian Tyumen Oil, and had been with Amoco.
Yukos’ chief financial officer was Bruce Misamore. Stephen Theede, a seasoned American oil man from Houston, was also CEO, COO and president between 2003 and 2004. British lawyer Tim Osborne was head of GML, the new name for Khodorkovsky’s discredited Menatep Bank that owned the bulk of Yukos’ shares.
Theede, Misamore, Osborne and legal counsel David Godfrey were later investigated for allegedly siphoning off billions of dollars of Yukos’ assets to a foundation set up in Holland.
In 2001 Khodorkovsky set up a lobby group called Open Russia, based in Somerset House, London, which is owned by the Rotschild Family Trust. Just before his arrest in 2003 he quickly transferred his bank’s equity in Yukos to Baron Jacob de Rotschild of London, member of the wealthiest banking family in the world. Despite the manoeuvre, Yukos oil assets were eventually acquired by the State-owned Russian oil company Rosneft.
Those oil men and bankers in the UK and the US had got so very close to getting their greasy hands on Russia’s oil. So close and yet so far, before prosecutors and that pesky Putin rained on their party.
Many institutions and media houses in Europe and the US insist on painting Khodorkovsky, whom they originally reviled as a rogue in the money-laundering bank scandal, as some form of hero, singing his praise as a former “prisoner of conscience”.
Maybe I am missing the plot entirely, but try as I may, I fail to understand how a Communist official turned billionaire, hobnobbing with top Western bankers and oil barons, who moved from private banking to ministerial energy posts, back to banking, with his bank auctioning state oil companies to itself and to his cohorts, then engaging in money laundering and tax evasion, hiding millions in tax havens, negotiating sales of Russia’s oil companies to American ones, and being wanted on charges of murder, could ever metamorphose into a credible political activist, democratic reformist and “prisoner of conscience”.
Oh, and did I mention philanthropist? Somehow that gets thrown into his list of accolades too” – noted Times Malta in the article “The great oil heist”.