Khodorkovsky resigns as Yukos chief

11.45am

MOSCOW - Oil tycoon Mikhail Khodorkovsky, Russia's richest man who is being held in jail on tax evasion and fraud charges, has resigned as head of oil giant Yukos.

Shares in the embattled company, which has been at the centre of a confrontation with the Kremlin since July, rose around 10 roubles to 372 roubles ($20.55) in the minutes following his announcement today.

But they remain about 15 per cent below their level before Khodorkovsky's gunpoint arrest on October 25.

"I am leaving the company," Khodorkovsky said in a dramatic declaration, issued from his Moscow cell. He said he wanted to shield Yukos from action by state prosecutors.

"As the leader of this company, I must do my utmost to lead our...team out from under the attack which has been directed against me and my partners," he said in a statement faxed to Reuters.

Khodorkovsky, 40, was whisked to Moscow after his arrest in Siberia and thrown into jail while his case was investigated.

Political commentators see the drive against Yukos, which has recently merged with a smaller rival Sibneft, as a move by hawks in the Kremlin out to punish Khodorkovsky for backing political opponents of President Vladimir Putin in forthcoming parliamentary elections.

A major Yukos shareholder, who is an ally of Putin, is being held on a charge of theft going back to a privatisation deal in the 1990s.

And prosecutors say they want to lift the parliamentary immunity of another Yukos shareholder so they can press charges of tax evasion.

An international lawyer acting on behalf of Khodorkovsky accused Russian authorities of total disregard of the rule of law.

"We are talking about a cancer, a cancer that is growing on the Russian body politic," said Robert Amsterdam, of Toronto law firm Amsterdam and Peroff.

Putin, some of whose top lieutenants are openly expressing alarm at a legal assault on Russia's biggest oil firm, will try to mollify European leaders this week with assurances that the Kremlin remains pro-business.

Putin's trip to western Europe will be his first foreign venture since Khodorkovsky's arrest and the freezing of shares in Yukos raised questions about the future of big business.

Putin attends a Russia-European Union summit in Rome on Thursday with Italian Prime Minister Silvio Berlusconi and then moves on to Paris for brief talks with President Jacques Chirac.

Earlier on Monday, in what is likely to be taken as a confidence vote for investors, Germany's Deutsche Bank said it would buy a 40 per cent stake in Russian investment bank United Financial Group.

"The EU will naturally raise Yukos, not directly related to Khodorkovsky but rather the weaknesses of the Russian legal system and property rights and the attractiveness of Russia for investors," said Yevgeny Volk of the Heritage Foundation.

"Putin will emphasise that the case is part of a broad fight against corruption and not an assault on property. I don't think he will be all that convincing. He may soften his rhetoric for a Western audience, but his general line won't be softer."

Putin, facing the biggest political and economic crisis of his three years in office, says he remains committed to the market.

The Kremlin leader last week vowed there would be no "bargaining" with industrialists over the affair, but his new chief of staff raised the possibility of a public policy shift at the weekend by casting doubts over the prosecutors' actions.

Those who have raised doubts about the action against Yukos include new Kremlin chief of staff Dmitry Medvedev recently appointed in a shakeup in Putin's administration in the wake of the Yukos affair. He said on Sunday that prosecutors should "probably consider all the economic consequences of measures they take".

Prime Minister Mikhail Kasyanov also expressed deep concern at events.

- REUTERS