Russian Stocks Plummet after Hague Rules in Favor of YUKOS

Thursday, August 21, 2014, PM | Leave Comment

Sanctions, imposed recently by the European Union, placed Russian business had already found itself in a precarious position. However, as if the sanctions weren’t bad enough, Russian business has undergone another crippling setback when the Hague made their unprecedented 50 billion dollar ruling in favor of oil industry powerhouse YUKOS.

The court has ordered the Russian Federation to pay out 50 billion dollars to the company that was once Russia’s largest producer of crude oil.

In the ruling made by The Hague’s Court of Arbitration, it was decided that the Russian government was liable for 50% of the full 100 billion dollars claimed in losses, damages and expenses by former shareholders of YUKOS via their holding company GML Ltd.

The news of the record breaking court decision has led to a major downturn in the Russian markets.

The market was already dealing with major setbacks considering that investor confidence was at its lowest ever.

This lack of confidence is due, in no small part, to the concerns left after sanctions were made in order to penalize the country for its inability to keep control over the pro-Russian rebellion going on in neighboring Ukraine.

More than any other company, Rosneft felt the largest blow as a result of The Hague’s landmark decision.

Rosneft, a publicly traded and state owned oil giant, purchased the large majority of YUKOS’ assets when they were forced to auction them off at the former company’s 2004 dissolution.

Rosneft shares dropped a full 2 percent after the news of the court’s decision went public.

For those who haven’t been keeping informed on the plight of YUKOS, the problems began over ten years ago. At the time, YUKOS was worth approximately 40 billion dollars and was forcibly broken up and nationalized.

At that time, Rosneft took over the majority of its assets. Suspiciously, Rosneft is run by a political friend to the Russian President, Vladimir Putin.

When YUKOS was dissolved, Mikhail Khodorkovsky, the YUKOS director, was arrested at gunpoint.

After two years of confinement, the former YUKOS director was convicted of tax evasion and theft and sentenced to a lengthy prison term.

After spending a decade in confinement, Khodorkovsky was released from prison just last year.

Leading to the groundbreaking ruling of The Hague’s Court of Arbitration, YUKOS made their argument that the Russian Government had unlawfully seized its assets by creating falsified taxes.

They further argued that their assets were sold in an auction that was nothing more than a thinly veiled front for a corrupt exchange from the Russian President to his long-time political ally.

Essentially, YUKOS indicated that the government’s forcible seizure and sham auction of the company’s assets were nothing short of racketeering.

Three years earlier, in an interim ruling, the European Court of Human Rights had found that Russia had used excessive enforcement proceedings against YUKOS.

This opened up the possibility for YUKOS to go after the Russian government with a claim of ‘Just Satisfaction.’

This claim led to a further 1.9 billion Euros being awarded to the former oil conglomerate by the European Court of Human Rights.

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