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U.S. Citizen of Russian Birth Set to Become Head of Russia's Biggest Company

Aired November 04, 2003 - 08:17   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


SOLEDAD O'BRIEN, CNN ANCHOR: Simon Kukes, a U.S. citizen of Russian birth, is set to become the head of Russia's biggest company today. Yukos Oil has been at the center of a crisis pitting billionaire Mikhail Khodorovsky against Russian President Vladimir Putin.
Jill Dougherty is following the story for us in Moscow -- Jill, good morning.

JILL DOUGHERTY, CNN CORRESPONDENT: Good morning, Soledad.

You know, this is really almost like a modern version of the Russian novel "Crime and Punishment." It's got a complex plot, but essentially the high points are you have Russia's richest man, Mikhail Khodorovsky, who's the head of Yukos Oil Company, arrested at gunpoint a few days ago, put into jail. An investigation is going on. They're charging him with fraud and tax evasion to the tune of $1 billion. And he realizes this is having a bad effect on the stock for Yukos.

He steps down last night and today the company announces that they have a new nominated CEO, and that is Simon Kukes. He's -- or he was born in Russia, emigrated from here back in the '70s, and then came back here to Russia to work. He'll be heading up the company. And today, at an extremely crowded news conference, he announced that it is business as usual, that Yukos is going to continue doing what it did, and that the leaving of Mikhail Khodorovsky really won't have any effect on business.

At the same time, you have another officer of the company coming out and saying that there still is some concern about where Russia is headed.

(BEGIN VIDEO CLIP)

STEVEN THEEDE, EXECUTIVE DIRECTOR, YUKOS-MOSCOW: I'm absolutely convinced that, you know, we'll continue to operate as a very successful going concern. I didn't say companies would be naive. I said I would be naive not to admit that if companies are looking at investing in Russia, that it wouldn't be unusual for them to take a wait and see attitude, or at least be a bit cautious right now. Because these are quite unusual events.

(END VIDEO CLIP)

DOUGHERTY: So, Mr. Khodorovsky, sitting in his jail cell here in Moscow, said that his plans are to work with an organization that he founded that essentially deals with civil society. It's called Open Russia. And that will give him, many analysts say, a perch, a possible political campaign coming up if he should want it -- Soledad.

O'BRIEN: Jill, this morning how are Russians reacting -- or this morning where we are. How are Russians reacting to criticism from the U.S. about all of this?

DOUGHERTY: Well, the average Russians probably are a bit confused about all of this in terms of where it's going. But the official response from Russia has been pretty strong. The foreign minister saying that essentially the U.S. is trying to meddle in Russian affairs and both he, the foreign minister, and Mr. Putin, the president, have said look, the United States has gone through Enron and other business deals like that and has survived. Nobody from here has been criticizing the United States about that. Why should they criticize Russia?

But, of course, many people are saying it's not exactly the same thing.

O'BRIEN: Jill Dougherty is our Moscow bureau chief.

Jill, thanks for that report.

Andrew Meier has written extensively about post-Soviet Russia. His new book is called "Black Earth: A Journey Through Russia After the Fall."

And Andrew Meier joins us from Washington this morning.

Nice to see you.

Good morning.

ANDREW MEIER, AUTHOR, "BLACK EARTH": Good morning.

O'BRIEN: Give me a sense -- a lot of this, as we've heard, has been pitched as an economic story but of course there are these huge political back stories and implications, as well. What do you think is behind the arrest of Khodorovsky?

MEIER: Well, this is part of a campaign that's really been going on for some time boiling beneath the surface in Moscow. I was there earlier this fall and people were already talking about Yukos and what, you know, the oil company that Mr. Khodorovsky controls, and Mr. Putin's desire to at least take a greater interest in it.

Khodorovsky had not only managed to create the largest oil company in Russia, he had also created arguably the fourth or the fifth largest in the world. That's a pretty big oil patch. It's one that Mr. Putin and the men around him certainly were taking a greater look at.

O'BRIEN: So what's concerned many people is this clampdown in the taking of, the freezing of shares. Is there any indication that the government, the Russian government, would hang onto those shares and that this could be indicative of a potential clampdown of other businesses?

MEIER: Well, there is no end game that's clear right now. There's a number of them playing out in Moscow. Western bankers are scrambling to try to figure out which one it will be. But what we can say today, though, is that none of them looks very pretty.

O'BRIEN: Putin, to some degree, has really been able to hold the line between balancing the oligarchs and also political power. And it seems by this action maybe that line has shifted a little bit.

Is there a sense that this is a message from President Putin that says make all the money you want, don't get into politics?

MEIER: Well, there's certainly that element in it. But the question is, you know, Khodorovsky was funding opposition parties to Putin. He was putting out a few million dollars to the very weak opposition parties. But this is a country, after all, that has a parliament where seats can be bought and sold. Business and politics are merged together. Anyone who's tried to do business in Russia in the last decade understands that.

It should be no surprise to Mr. Khodorovsky, his investors or certainly those people in the Kremlin.

O'BRIEN: Would the announcement of the new director of Yukos and also the fact that the shares have been frozen, what's been the impact on the economy in Russia, which was doing extremely well?

MEIER: Well, to everyone's surprise, Khodorovsky, from his jail cell, there have been Russians who've managed companies from jail before. It wouldn't be a precedent. But yesterday he stepped down. This was seen as a shock in Moscow. It was actually a very clever move. He stepped down and there was a bit of a spike in the shares yesterday for Yukos.

His personal shares look like they'll be managed by a proxy in a trust. Yukos will probably survive in one form or another. But the final outcome is by no means clear.

O'BRIEN: Andrew Meier is the author of "Black Earth."

Thanks for joining us, Mr. Meier.

Appreciate your time.

MEIER: Thank you.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com





Russia's Biggest Company>


Aired November 4, 2003 - 08:17   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
SOLEDAD O'BRIEN, CNN ANCHOR: Simon Kukes, a U.S. citizen of Russian birth, is set to become the head of Russia's biggest company today. Yukos Oil has been at the center of a crisis pitting billionaire Mikhail Khodorovsky against Russian President Vladimir Putin.
Jill Dougherty is following the story for us in Moscow -- Jill, good morning.

JILL DOUGHERTY, CNN CORRESPONDENT: Good morning, Soledad.

You know, this is really almost like a modern version of the Russian novel "Crime and Punishment." It's got a complex plot, but essentially the high points are you have Russia's richest man, Mikhail Khodorovsky, who's the head of Yukos Oil Company, arrested at gunpoint a few days ago, put into jail. An investigation is going on. They're charging him with fraud and tax evasion to the tune of $1 billion. And he realizes this is having a bad effect on the stock for Yukos.

He steps down last night and today the company announces that they have a new nominated CEO, and that is Simon Kukes. He's -- or he was born in Russia, emigrated from here back in the '70s, and then came back here to Russia to work. He'll be heading up the company. And today, at an extremely crowded news conference, he announced that it is business as usual, that Yukos is going to continue doing what it did, and that the leaving of Mikhail Khodorovsky really won't have any effect on business.

At the same time, you have another officer of the company coming out and saying that there still is some concern about where Russia is headed.

(BEGIN VIDEO CLIP)

STEVEN THEEDE, EXECUTIVE DIRECTOR, YUKOS-MOSCOW: I'm absolutely convinced that, you know, we'll continue to operate as a very successful going concern. I didn't say companies would be naive. I said I would be naive not to admit that if companies are looking at investing in Russia, that it wouldn't be unusual for them to take a wait and see attitude, or at least be a bit cautious right now. Because these are quite unusual events.

(END VIDEO CLIP)

DOUGHERTY: So, Mr. Khodorovsky, sitting in his jail cell here in Moscow, said that his plans are to work with an organization that he founded that essentially deals with civil society. It's called Open Russia. And that will give him, many analysts say, a perch, a possible political campaign coming up if he should want it -- Soledad.

O'BRIEN: Jill, this morning how are Russians reacting -- or this morning where we are. How are Russians reacting to criticism from the U.S. about all of this?

DOUGHERTY: Well, the average Russians probably are a bit confused about all of this in terms of where it's going. But the official response from Russia has been pretty strong. The foreign minister saying that essentially the U.S. is trying to meddle in Russian affairs and both he, the foreign minister, and Mr. Putin, the president, have said look, the United States has gone through Enron and other business deals like that and has survived. Nobody from here has been criticizing the United States about that. Why should they criticize Russia?

But, of course, many people are saying it's not exactly the same thing.

O'BRIEN: Jill Dougherty is our Moscow bureau chief.

Jill, thanks for that report.

Andrew Meier has written extensively about post-Soviet Russia. His new book is called "Black Earth: A Journey Through Russia After the Fall."

And Andrew Meier joins us from Washington this morning.

Nice to see you.

Good morning.

ANDREW MEIER, AUTHOR, "BLACK EARTH": Good morning.

O'BRIEN: Give me a sense -- a lot of this, as we've heard, has been pitched as an economic story but of course there are these huge political back stories and implications, as well. What do you think is behind the arrest of Khodorovsky?

MEIER: Well, this is part of a campaign that's really been going on for some time boiling beneath the surface in Moscow. I was there earlier this fall and people were already talking about Yukos and what, you know, the oil company that Mr. Khodorovsky controls, and Mr. Putin's desire to at least take a greater interest in it.

Khodorovsky had not only managed to create the largest oil company in Russia, he had also created arguably the fourth or the fifth largest in the world. That's a pretty big oil patch. It's one that Mr. Putin and the men around him certainly were taking a greater look at.

O'BRIEN: So what's concerned many people is this clampdown in the taking of, the freezing of shares. Is there any indication that the government, the Russian government, would hang onto those shares and that this could be indicative of a potential clampdown of other businesses?

MEIER: Well, there is no end game that's clear right now. There's a number of them playing out in Moscow. Western bankers are scrambling to try to figure out which one it will be. But what we can say today, though, is that none of them looks very pretty.

O'BRIEN: Putin, to some degree, has really been able to hold the line between balancing the oligarchs and also political power. And it seems by this action maybe that line has shifted a little bit.

Is there a sense that this is a message from President Putin that says make all the money you want, don't get into politics?

MEIER: Well, there's certainly that element in it. But the question is, you know, Khodorovsky was funding opposition parties to Putin. He was putting out a few million dollars to the very weak opposition parties. But this is a country, after all, that has a parliament where seats can be bought and sold. Business and politics are merged together. Anyone who's tried to do business in Russia in the last decade understands that.

It should be no surprise to Mr. Khodorovsky, his investors or certainly those people in the Kremlin.

O'BRIEN: Would the announcement of the new director of Yukos and also the fact that the shares have been frozen, what's been the impact on the economy in Russia, which was doing extremely well?

MEIER: Well, to everyone's surprise, Khodorovsky, from his jail cell, there have been Russians who've managed companies from jail before. It wouldn't be a precedent. But yesterday he stepped down. This was seen as a shock in Moscow. It was actually a very clever move. He stepped down and there was a bit of a spike in the shares yesterday for Yukos.

His personal shares look like they'll be managed by a proxy in a trust. Yukos will probably survive in one form or another. But the final outcome is by no means clear.

O'BRIEN: Andrew Meier is the author of "Black Earth."

Thanks for joining us, Mr. Meier.

Appreciate your time.

MEIER: Thank you.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com





Russia's Biggest Company>