Reply #31: Yukos Woes Damage Hopes for Russian Capitalism

[54anickel]

So,is that necessarily a "bad" thing? :shrug:

http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_lynn&sid=a33OSBGf0WoI

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Few believe that Yukos can survive much longer. ``The Yukos debacle is apparently spiraling out of control, heading for the sort of catastrophe outcome we had thought unlikely,'' said Eric Kraus, chief strategist at Moscow-based Sovlink Securities, in an e-mailed response to questions. ``Although there remains the possibility of a last-minute settlement, hope is fading fast.''

Last week, the government appeared to have stopped the company from pumping any more oil, an event that sent the global oil price to a two-decade high. And although that was later clarified, it suggests the government will pull no punches in its battle with the company.

This is far more than just a corporate story. Without Yukos, Russia's, and indeed Europe's, economy will be immensely poorer.

Why? Because Yukos was a force for modernization of the Russian economy. Should it disappear from view, investors will have to stop fooling themselves that Russia is ready to become a developed, Western-style capitalist country.

snip>

The attack on Yukos may be limited to that company. Or it may spread to other oligarchs, and to the whole oil industry.

Yet, two points seem beyond debate.

First, the Russian government isn't interested in placating global capital markets. It doesn't believe international investors have to be wooed. It puts its own interests first, and if that means less foreign investment, so be it.

Two, it has no intention of leaving the market alone.

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