The Tech - Online EditionMIT's oldest and largest
newspaper & the first
newspaper published
on the web
Boston Weather: 51.0°F | Partly Cloudy

Russian Prosecution Freezes Billions in Oil Company Stock 2 decks

By Steven Lee Myers

The New York Times -- MOSCOW

Russian prosecutors on Thursday froze stock worth billions of dollars in Russia’s richest company, Yukos Oil, raising the stakes in their investigation of its imprisoned chief executive, Mikhail B. Khodorkovsky.

The move came as the Kremlin announced that President Vladimir V. Putin had removed his chief of staff, Aleksandr S. Voloshin, who had already submitted his resignation to protest Khodorkovsky’s arrest. Putin replaced Voloshin with Dmitri A. Medvedev, 38, a lawyer who had been Voloshin’s deputy.

Compared with Boris N. Yeltsin’s presidency, Putin’s term has been noted for its stability. The move on Thursday was the most significant change in his inner circle since he took office nearly four years ago and demonstrated the wide political ramifications of Khodorkovsky’s arrest.

With the promotions of Medvedev and another aide, Dmitri N. Kozak, who assumes Medvedev’s old position, Putin appeared to solidify the power of a coterie of advisers who have worked for him since he served in St. Petersburg’s reformist government after the collapse of the Soviet Union.

The Yukos situation has highlighted a political struggle in Russia between reform-minded officials favoring a market economy and others, often with a background in the state security services, who are determined to retain a strong dose of state control. Putin has been trying to steer a course between the two.

The Prosecutor General’s office announced its action -- by far the largest freezing of assets here -- as Putin met with major foreign investors to try to reassure them.

The freezing of 1.2 billion Yukos shares -- 44 percent of the total, the company said -- sent the country’s already reeling stock prices plunging still further. The seized shares are owned by Khodorkovsky and his partner, Platon Lebedev, who was arrested in July. Those shares were worth $14 billion at the start of the day but $12 billion by the end.

A spokeswoman for the prosecutor general, Natalya B. Vishnyakova, said in televised remarks that the freezing of the shares did not represent the “confiscation or nationalization” of Yukos assets. Still, the government could in theory end up with a large stake in the company if prosecutors prevail in court.

In an e-mail message sent after the meeting with Putin, Stephan Newhouse, the chairman of Morgan Stanley International, said of the Russian president: “With regard to the recent Yukos events, he assured us that this does not represent a campaign against business, nor any change in the government’s commitment to the market economy,”

But Voloshin’s resignation has led many analysts to conclude that the struggle between reformists and hard-liners has been won by the KGB veterans, some of whom belong to the St. Petersburg crowd Putin brought to the Kremlin.