What Yukos case shows about ‘rule of law’

By Deirdre Griswold, Workers World, 13 January 2005

A strange legal battle in Houston over control of a significant portion of Russia's oil wealth has exploded several myths used to justify capitalist counter-revolution in the former Soviet Union.

The case involves Yuganskneftegas—the main asset of the privately owned Yukos oil company. It was auctioned off by the Russian government and is now in the process of being nationalized. Yukos had been in danger of falling completely under the control of the U.S. oil oligarchy.

After the breakup of the USSR, foreign capitalists moved quickly to grab control of what had been state property at fire-sale prices. But in most cases, this foreign imperialist ownership was concealed through various legal and illegal mechanisms.

Mikhail Khodorkovsky, who would become the CEO of Yukos, emerged almost overnight as a billionaire because of his connections to foreign money. After Khodorkovsky was jailed in late 2003 by the Russian government for fraud and evading $27.5 billion in taxes, two U.S. citizens—Steven M. Theede and Bruce K. Misamore—took over as chief executive officer and chief financial officer, respectively, of Yukos.

It was a breathtakingly confrontational move by the U.S. petro-oligarchy—which, as is well known, has enormous clout in the Bush administration. Putting two guys from the U.S. in charge of Yukos' day-to-day operations was like the wolves marking their territory. And who were these wolves? While Khodorkovsky was still in charge, Exxon Mobil had been preparing to sink $20 billion into Yukos, and ChevronTexaco had also showed interest in getting a piece of the action.

So the Russian government decided to auction off the lion's share of Yukos in such a way that the state could take back control over this vital part of the economy. On Dec. 19, a previously unknown company called Baikal Finance Group bid $9.4 billion to take over Yuganskneftegas with the promise of meeting its tax obligations.

It was a big surprise to the U.S. oil oligarchs. Through Bruce Misamore of Yukos, they had gone to court in Texas the day before to block the auction by filing for bankruptcy protection. Incredibly, U.S. Judge Letitia Clark ruled that her court had jurisdiction in the case. But that ploy didn’t stop the auction.

U.S. journalists scrambled to find out who was behind Baikal. All they found was an obscure office in a small town north of Moscow. Baikal has since been taken over by the state-owned company, Rosneft.

The U.S. had expected that Gazprom, the largest oil company in Russia, would place the winning bid. It had already been in discussions with Deutsche Bank to get financing for the move. The court case in Houston was meant to block the sale by preventing the German bank from underwriting Gazprom.

But what gave a Houston bankruptcy court jurisdiction over a Russian oil company?

The excuse was laughable. Misamore, who had left Moscow just two weeks earlier, said he had moved his personal office to Houston—and that gave the U.S. court jurisdiction. Of Yukos' thousands of employees, he was the only one in the United States. The company had no assets or business here. But no matter. The bankruptcy judge in the oil state of Texas ruled for Misamore.

Deutsche Bank is appealing the ruling. “Yukos essentially is seeking to have this court intervene in a tax dispute between a Russian company, Yukos and the Russian Federation with regard to its exercise of its sovereign powers,” Deutsche argued.

Rewriting bankruptcy law

The rush by Big Oil to block the sale of Yukos was so clumsy and hasty that it has created a big legal tangle. The Financial Times of London wrote on Dec. 30 that the Houston court's ruling “has prompted widespread surprise from legal experts who said it could lead to a flow of applications from foreign companies for bankruptcy protection.”

Those from the imperialist U.S. who pushed capitalism down the throats of the workers in the former socialist countries did so in the name of “the rule of law” and building an “open society.” They argued that state ownership promotes lawlessness and cronyism, but capitalist competition would revive the economy by rewarding honesty, openness and entrepreneurial creativity.

However, the only laws they respect are the ones the imperialists write themselves. Even under capitalist law, Russia has every legal right to take over a company that rips off the country's assets and doesn’t even pay taxes. But that's not good enough for the imperialist wolves. They say U.S. law should take precedence over Russian sovereignty. And if they have to reinterpret U.S. bankruptcy law in order to hamstring both their German imperialist rivals and the Russian government, they’ll do that too—as the Houston case has shown.

They also wax indignant at Russia for having created a corporate front—Baikal Finance—in order to get around the threatened U.S. sanctions on Gazprom. But what is Yukos? A corporate front created by the imperialists for the purpose of grabbing Russia's oil. What's sauce for the goose is sauce for the gander.

This takeover of Yukos by the Russian state does not mean a return to socialism. That will take a great class struggle by the workers against the new capitalist owners. But it shows there is a growing anger in Russia against the aggressive moves of predatory imperialism, especially the U.S. A sign carried in a recent large and youthful demonstration at the U.S. Embassy in Moscow read: “Russian oil not for you, Bush!” (mosnews.com)