INVESTORS WORRIED BY KHODORKOVSKY TRIAL, BUT MONEY CONTINUES TO POUR INTO RUSSIA

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MOSCOW (RIA Novosti political commentator Yana Yurova) - The reading of the verdict for ex-Yukos head Mikhail Khodorkovsky, who once was one of the biggest oligarchs in Russia, has been going on for a week and is far from over.

This slack tempo may have political reasons, but then, it is the first time that a Russian court has heard a case on this scale. Trying to read out all of the 1,000 pages of the file would have been no less of a torture for the defendants and everyone else.

The court has found Khodorkovsky guilty on almost all counts. The former oligarch will have to spend some time in prison. But how long? Prosecutor Dmitry Shokhin is demanding ten years in a minimum-security prison.

If it were not Khodorkovsky, the public would have hardly been surprised at the sentence, because economic crimes were traditionally punished very severely in Russia. Some 20 years ago, a small bribe could send you to a maximum-security prison for eight years.

Khodorkovsky is charged under seven articles, including major fraudulent embezzlement by an organized group; neglect to comply with an enforced court decision; inflicting damage on other's property through fraud; major tax evasion by collusion within a group; avoidance of private income tax or insurance payments to state extra-budgetary funds; repeated forgery of official documents; and major embezzlement or laying false claim to others' property within an organized group.

On May 13, Natalia Vishnyakova, the chief spokesperson of the Prosecutor General's Office, said new charges would be brought against Khodorkovsky soon, including on laundering billions of rubles. The ex-oligarch may be facing new trouble.

However, this drawn-out trial has ceased to be a crucial factor in the Russian economy. Judging by economic indicators, the Yukos saga has been downgraded from a political to a purely legal, though not quite ordinary, case. Eighteen months ago investors were shocked to learn that the oligarch, whom television frequently showed socializing with the political elite, had been flung behind bars. But as time went by, businessmen drew their conclusions from the case. The Russian business community saw that the era of an economic game without rules had come to an end. The foreigners decided that it would be best not to deal with oligarchs, that is people who think that they are part of state politics.

Nobody plans to bypass Russia with its vast market and high profitability. It would be wrong to assume that business is cowardly and overcautious. On the contrary, a true businessman is an opportunist. He knows that business is a game where someone loses, while somebody else wins.

This is how many foreigners view the failure of the ex-Yukos head. To them, his former empire is a profitable asset they would be able to claim after the trials are over. Trying to frighten off rivals, they are shouting about undemocratic treatment of investors in Russia.

It would not be logical to say that the investment climate has deteriorated in Russia because of the Yukos saga. According to the latest data of the State Statistics Service, the volume of foreign capital accrued in the Russian economy as of late March 2005 was $85.1 billion or 49.1% more than a year before. Direct investment accounts for nearly a half of this sum (44.5%).

The main investor countries are Cyprus, Luxembourg, the Netherlands, Germany, Britain, the U.S. and France. In the first quarter of this year, the Russian economy received $6 billion. The Finance Ministry predicts the net inflow of private capital to Russia at $1.5 billion in 2006, $6.9 billion in 2007, and $11.6 billion in 2008.

If the investors bring their money so readily now, what will happen when the Yukos saga becomes history? In this sense, the Russian authorities would gain by intervening in the trial to end it as soon as possible. A protracted spectacle gives the audiences more chances to discuss the gap between Vladimir Putin's entreaty not to "terrorize" business and reality. In fact, the president only called on the business and tax agencies to abide by law. And he certainly did not say a word about the ability of business to do as it pleases.

The opinions expressed in this article are those of the author and may not necessarily represent the opinions of the editorial board.

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