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Putin lets go of his free-market image

The Kremlin's sudden attack on oil company Yukos is a flashpoint in a war between two rival clans. One wants Russia to continue its integration into the global economy, the other doesn't. It is not certain which will win.

ON JULY 2, Platon Lebedev, chairman of Yukos's parent company and Russia's thirteenth-richest man admitted himself to hospital complaining of chest pains. The same day, he was arrested and secured in Lefortovo prison, a former KGB lock-up usually reserved for spies and traitors. He was charged with defrauding the state of more than $280 million in the privatization of a fertilizer company in 1994.

In the ensuing days, the offices of Yukos were searched by armed guards and investigations were opened into charges of tax evasion and murder by the oil company's senior management.

Mikhail Khordorkovsky, the well-connected chief shareholder in Yukos and Russia's richest man, was called in for two hours of questioning at the prosecutor-general's office.

The Russian equity market reeled. Until then it had been enjoying its best six months since the 1998 crisis. UK oil major BP had shown great faith in its stability by investing around $6 billion in a joint venture with oil company TNK. That mega-deal was soon followed by the merger of domestic oil companies Yukos and Sibneft, to create one of the world's biggest oil companies. Meanwhile, from Stillwater Mining in the US to Chelsea football club in London, Russian oligarchs were buying assets abroad, and improving their legitimacy in the eyes of foreign investors.

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