Khodorkovsky, Yukos, and Putin

Abstract

The arrest of YUKOS CEO Mikhail Khodorkovsky and the destruction of YUKOS marked a turning point in the development of post-Soviet Russia. Under Khodorkovsky’s leadership, in four years (1999–2003) YUKOS went from a poorly-run undervalued company to a dynamo that was worth a third of the entire Russian stock market in one of the most impressive business and management case histories ever recorded. Khodorkovsky’s support of political opposition parties was likely a primary factor leading to his arrest. Another contributing factor was entrenched interests who felt threatened by Khodorkovsky’s success and growing power and knew how to maneuver both him and Putin towards a collision. However, the rapidly approaching merger with ChevronTexaco was the key to the timing of the arrest. YUKOS destruction and the ensuing slowdown in Russian production growth was a significant factor in the oil price spike of 2005–2008. While the increased oil price arguably initially had a positive impact on Russia, much of that advantage was dissipated by the capital flight that developed after 2008, an effect of the retreat from rule of law, necessary to break YUKOS. The breakup of YUKOSSibneft also possibly cut short the oilfield production revolution that eventually took place in the USA.