Between 2003 and 2007 the Russian Federation executed the most brutal expropriation in the country’s history. The following summary recounts a blatantly political campaign that was analysed in detail by the arbitral tribunal in The Hague, and which appears on pages 257-69 of the Final Award.
Yukos chief executive, Mikhail Khodorkovsky, played a growing role in civil society and public life. In 2001 he launched the Open Russia Foundation to support the country's fledgling democracy. But in the eyes of President Putin, he posed a threat.
Shortly after a televised meeting with the Russian Union of Industrialists and Entrepreneurs in February 2003, where Khodorkovsky spoke about the need to curb corruption, state authorities began to harass and threaten Yukos staff; the company’s offices were searched and files confiscated.
In October 2003, Mikhail Khodorkovsky was seized at gunpoint. Even after the European Court of Human Rights condemned his trial, he would spend more than a decade in jail.
A man of honour, Vasily Aleksanyan refused to give false testimony against his Yukos colleagues. He died two years after his release from detention.
In all, more than 30 Yukos employees were interrogated or arrested. The European Court of Human Rights has condemned Russia six times for violating the basic rights of former Yukos executives, and in 2014 the Court awarded former shareholders €1.9 billion in compensation.
For Yukos Executive Vice-President, Vasily Aleksanyan, these rulings came too late. He was diagnosed with lymphoma and AIDS shortly after his detention, but was repeatedly denied urgent medical attention even as his health deteriorated. A man of honour, Aleksanyan refused to give false testimony against his Yukos colleagues. He remained in pre-trial detention for almost three years in conditions described as “monstrous” by Russia’s Human Rights Council. In 2008 the European Court of Human Rights ordered Russia to release him. Aleksanyan never recovered, and died shortly after his release.
In December 2003, without warning, Russian tax authorities demanded $3.5 billion from Yukos - only a few months after a regular tax audit had given the company a clean bill of health. Yukos was ordered to pay the full amount in two days.
Over the next two years, the authorities would demand a total of $24 billion, and refuse every offer of dialogue. Every act of the authorities raised a simple question: why would they harass and threaten Yukos if their true purpose was to collect taxes?
As it pursued its campaign of intimidation, the Russian state revealed its true goal: to destroy Yukos and steal its assets. In 2006, the state auctioned off Yukos’s core production facility, Yuganskneftegaz, in less than 10 minutes. The vast majority of Yukos's assets were acquired well below their market value by Rosneft, the state-owned oil producer, and its affiliates. Yukos was forced into bankruptcy in 2006, and struck from the company register in 2007.