Inside the Yukos Endgame

As in so many murder mysteries, the killing of the Russian oil giant Yukos — which began last fall with the arrest of its CEO, Mikhail Khodorkovsky, and could climax at any time with the firm's bankruptcy or forced sale of assets — is being committed in public but was plotted in private. The hammer blows that are bringing down the firm have been delivered in plain sight: Khodorkovsky's ongoing trial for alleged fraud, tax evasion and embezzlement; the Russian government's demand for up to $6.8 billion in alleged unpaid corporate taxes; its simultaneous freezing of company assets, which makes that tax bill impossible to pay; and, last week, a Moscow court's rejection of Yukos' bid to suspend the government's efforts to collect the first $3.4 billion. "We can't survive," Yukos CFO Bruce Misamore told the Financial Times.

But the motives behind all this have remained murky. President Vladimir Putin insists that "the government should not cause Yukos' collapse," and says prosecutors "are acting

	The key point is taking oil under informal but tight kremlin control. — MIKHAIL DELYAGIN, economist

properly as long as they stay within the law." Others see a campaign to strip Khodorkovsky of political influence, roll back the power and wealth of the Russian oligarchs, and perhaps even renationalize Russia's oil industry.

The clearest indication of motive may have come last month, when Putin's aide-de-camp and deputy chief of staff, Igor Sechin, was named chairman of the board of directors of the state-owned oil company, Rosneft. Sechin, 43, has no known experience in the oil business. Rosneft would not comment on the appointment. But the company is poised to snap up some or all of the pieces of Yukos at the state-run sale expected to follow Yukos' demise. "The appointment of Putin's closest and most secretive lieutenant as head of Rosneft is a sign that Putin has set out to take over the Russian oil industry," charges Economist Mikhail Delyagin, a former top aide to President Boris Yeltsin, now director of the Institute of Modernization, a Moscow-based think tank. Many oil magnates, officials and analysts believe a Rosneft takeover is the real motive for destroying Yukos. "Sechin's role in this is an open secret," says Duma deputy Alexei Kondaurov, a former KGB general and Yukos executive.

Profits and tax revenues from the oil industry fund over half of Russia's federal budget. Yukos accounts for 20% of Russia's oil production, Rosneft for 4.5%. But Sergei Oganesyan, head of the Federal Energy Agency and Rosneft's deputy board chairman, predicted earlier this month that Rosneft will soon account for 20%. Oganesyan didn't say how it would reach this goal, but analysts see no other options besides grabbing chunks of Yukos. But that may only be the first step, a senior Russian cabinet official tells Time. Next, he says, Rosneft may mount a takeover bid against Slavneft. Russia's seventh-largest oil company is now co-owned by YukosSibneft and TNK-BP, a Russian-British holding company. But with Sibneft slowly unwinding its merger with the embattled Yukos, Sechin-led Rosneft may be in the best position to buy Sibneft's stake in Slavneft. "If Sechin can pull it off, and if he sorts it out with BP," Delyagin says, "it will spell a decisive victory for Putin. The key point is taking oil under informal but tight Kremlin control, rather than launching a formally state-owned concern," which would scare off foreign investors.

The new board chairman of Rosneft, who avoids publicity and contact with outsiders, is a key member of the Siloviki (hard men) — Putin's coterie of top security, law-enforcement and military brass, who many say are becoming Russia's new oligarchs. He won the new job after 14 years of loyal service to Putin. A 1984 graduate of Leningrad University in French and Portuguese, Sechin started his career as a translator in Africa. The Russian media alleged that he had kgb ties. A former Soviet army officer who knew him well in 1987 during the civil war in Angola describes him as "one real cool guy. Taciturn, withdrawn, personally honest, reliable and accessible. A guy to be trusted."

That's certainly how Putin sees him. Sechin first met the future President in 1990 on an official visit to Brazil, where he translated for Putin. He hasn't left Putin's side since. "I liked Sechin," Putin wrote in his 2000 memoir. "When I moved to Moscow, he asked to go along. I took him." He served as Putin's factotum in the Kremlin in 1997, and in the Federal Security Service (FSB) as Putin became its director in 1998. When Putin became acting President, he named Sechin deputy chief of staff. "Sechin is not just Putin's sounding board," says the cabinet official. "Sechin is part of his brain cells."

Sechin's appointment, critics say, is another step in the redistribution of power and wealth from the Yeltsin-era "Family" — the oligarchs of the 1990s — to the Siloviki élite. If they're right, the next step will be a Rosneft victory in the race to snap up Yukos assets. Meanwhile, the ties among Moscow's new élite grow ever closer. Last year, Sechin's daughter Inga married an FSB school cadet named Dmitri Ustinov. The cadet's father is Vladimir Ustinov, the prosecutor-general overseeing the legal attack on Yukos. Welcome to Moscow's new Family.