Concerning the Kremlin by Carbonell

Topics: Russia, Natural gas, Belarus Pages: 34 (11113 words) Published: January 8, 2013
Citation: 12 U. Pa. J. Bus. L. 257 2009-2010 Content downloaded/printed from HeinOnline ( Fri Nov 16 01:21:16 2012 -- Your use of this HeinOnline PDF indicates your acceptance of HeinOnline's Terms and Conditions of the license agreement available at -- The search text of this PDF is generated from uncorrected OCR text. -- To obtain permission to use this article beyond the scope of your HeinOnline license, please use: &operation=go&searchType=0 &lastSearch=simple&all=on&titleOrStdNo=1097-4938


Brenden Marino Carbonell*

On October 25, 2003, heavily armed police surrounded the private jet of Mikhail Khodorkovsky, the billionaire head of Russia's then leading oil producer Yukos, and arrested him.' The following months witnessed the government-orchestrated destruction of Yukos through sweeping arrests of the oil giant's top managers and a barrage of massive tax assessments and penalties.2 The final blow came in December 2004 with the auction of Yuganskneftegaz, 3 Yukos' most prized production entity, which alone accounted for 60 percent of the oil company's output. 4 The $9.3 billion winning bid was submitted by a previously unknown entity named * Brenden Marino Carbonell is a third-year law student at the University of Pennsylvania Law School. Brenden graduated magna cum laude from Yale with a Bachelor's Degree in Ethics, Politics, and Economics, earning Distinction in his major and induction into Phi Beta Kappa. His studies inspired him to investigate the social and legal ramifications of political and economic transitions, most notably those of the countries of the former Soviet Bloc. With a burgeoning interest in Russia, Brenden decided to master the Russian language, and went on to win Yale's First Year Russian Student Award. In addition, Brenden has a passion for Cuba, and his senior thesis on the Cuban military won First Prize in the Jorge Perez L6pez Competition of the Association for the Study of the Cuban Economy (ASCE). He presented his thesis at the ASCE conference in Miami in 2007, and at the international conference "A Changing Cuba in a Changing World" held in New York City in the spring of 2008. Brenden is a joint-degree candidate, pursuing both his Juris Doctor at Penn Law and a Master's in International Studies with a concentration in Russian at Wharton's Lauder Institute. 1. MARSHALL I. GOLDMAN, PETROSTATE: PUTIN, POWER, AND THE NEW RuSSIA 116 (2008). 2. See Id. at 116-20 (noting the "more than two dozen people associated with Yukos who have either been jailed or have fled into exile."). 3. "Neft" and "gaz" are the Russian words for "petroleum" and "natural gas" respectively. 4. See Id. at 120 (stating that "[s]everal outside appraisers insisted that the price was less than half of what such an auction should have yielded.").

HeinOnline -- 12 U. Pa. J. Bus. L. 257 2009-2010



[Vol. 12:1

Baikalfinansgroup,5 which days later merged with the state-controlled oil company Rosnefti.6 In little over a year, as if suddenly struck by the thunderbolt of an enraged god, Yukos' market capitalization, which in 2003 had surpassed $40 billion, had plummeted 95 percent to roughly $2 billion. When the dust finally settled, the Russian government had effectively renationalized the Yukos Oil Company.8 The Russian state's intense effort to dismantle Yukos and, ultimately, re-acquire the private oil company's assets, ushered in a new era. The laissez-faire government policy that fuelled the free-wheeling "market euphoria" 9 characteristic of Russia's energy sector in the 1990s' ° had come to an abrupt end. A new, more sobering state project had succeeded: the reassertion of state control over Russia's vast energy resources. Russia's former...
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