30 October 2003 09:05
Putin turns on the charm to ease bankers` worries
Russia's President Vladimir Putin yesterday went on a charm offensive with the leading international banks and
brokerage houses, arguing that the arrest of Mikhail Khodorkovsky, the head of Yukos, was not part of an organised
campaign against business in Russia.
At a meeting with bankers which lasted for more than 90 minutes, Mr Putin stressed his commitment to market reforms
and made a number of liberal statements designed to calm the Russian market, which on Thursday lost another 8 per cent
as a result of conflict around the oil company.
Charles Ryan, the chairman of the United Financial Group, a Moscow-based investment bank, said Mr Putin referred to
Yukos as a sad affair in which the government had to enforce the law.
"The president said he was aware that other shareholders in Yukos would suffer in the medium term, but that in
the long term they would benefit from the better rule of law," Mr Ryan said.
Bankers said Mr Putin went out of his way to explain that the arrest of Mr Khodorkovsky and Platon Lebedev, another
key shareholder in Yukos, was not an attack on the company as a corporate entity.
He also made clear that the investigation of Yukos would not spill over to other companies. "He told us this was
not part of confiscation or renationalisation of assets," one banker said.
Mr Putin likened the investigation of Yukos's shareholders to Enron and WorldCom.
However, when bankers pointed out that both companies had ceased to exist as a result of the legal actions, Mr Putin
stressed that his aim was to preserve Yukos as a company.
Igor Sagiryan, president of Renaissance Capital, another Moscow-based investment bank, said: "Mr Putin was very
clear that it would be a catastrophe if Yukos fell apart as a company. He said innocent employees and innocent investors
should not suffer as a result of the investigation."
The Russian president said he could not interfere with the legal process as long as the prosecutors were acting
within the law. However, Mr Putin said it was his job to ensure that prosecutors acted in accordance with the law and
did not behave overzealously, according to Mr Ryan.
According to one banker, Mr Putin expressed regret that Vasily Shakhnovsky, a Yukos shareholder charged with tax
evasion, was using his recent election to the upper chamber of the Russian parliament as a shield against
investigations.
To offset investor concern about Yukos, Mr Putin made a number of liberal market statements. In particular he
promised foreign bankers that the liberalisation of the shares in Gazprom, the state-controlled gas monopoly, "was
a question of months rather than years".
At present foreigners are not legally allowed to buy domestic Gazprom shares, which are trading at a significant
discount to American Depository Shares.
Minority shareholders have been campaigning for years to remove the two-tier share structure, and the liberalisation
of Gazprom shares could be viewed as a pay-off to foreign investors who had suffered as a result of the Yukos in-
vestigations.
Mr Putin said he had also welcomed tax breaks for investors in Russian debt and equity.
He said he also supported legislation that would allow Russian institutional investors to invest in foreign
assets.
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