Report

Europe Deals a Double Blow to Putin’s Russia

A Belgian court goes after Russian assets in the decade-old Yukos case just as Brussels renews economic sanctions on Moscow through the rest of the year.

By , a senior staff writer at Foreign Policy.
PUTIN-June

More than a decade after Russia stole the assets of oil giant Yukos, shareholders of the now-defunct firm may be a feeling a profound sense of schadenfreude after a Belgian court reportedly ordered the seizure Wednesday of 1.6 billion euros worth of Russian assets.

The decision would be the first fruit of the largest arbitration case in history, decided last summer, in which former Yukos shareholders won a $50 billion settlement against Russia. An international arbitration panel in The Hague ruled that the dismantling of Yukos beginning in 2003 was politically motivated. It said that Russian President Vladimir Putin and other top Russian officials used a tax dispute to wrangle away Yukos’s assets — and imprison its then-boss, Mikhail Khodorkovsky — to bolster the prospects of other Russian energy firms run by oligarchs friendlier to the Kremlin. Khodorkovsky was freed in late 2013 after nearly a decade in jail, including time in Siberia.

In a second blow on what turned into a tough day for Moscow, the European Union overcame a spate of internal divisions and renewed economic and financial sanctions on Moscow through next January, an effort to keep the pressure on the Kremlin while Russia continues to destabilize eastern Ukraine.

More than a decade after Russia stole the assets of oil giant Yukos, shareholders of the now-defunct firm may be a feeling a profound sense of schadenfreude after a Belgian court reportedly ordered the seizure Wednesday of 1.6 billion euros worth of Russian assets.

The decision would be the first fruit of the largest arbitration case in history, decided last summer, in which former Yukos shareholders won a $50 billion settlement against Russia. An international arbitration panel in The Hague ruled that the dismantling of Yukos beginning in 2003 was politically motivated. It said that Russian President Vladimir Putin and other top Russian officials used a tax dispute to wrangle away Yukos’s assets — and imprison its then-boss, Mikhail Khodorkovsky — to bolster the prospects of other Russian energy firms run by oligarchs friendlier to the Kremlin. Khodorkovsky was freed in late 2013 after nearly a decade in jail, including time in Siberia.

In a second blow on what turned into a tough day for Moscow, the European Union overcame a spate of internal divisions and renewed economic and financial sanctions on Moscow through next January, an effort to keep the pressure on the Kremlin while Russia continues to destabilize eastern Ukraine.

The legal and economic double whammy underscores Moscow’s increasing isolation as it continues to support pro-Russian rebels in eastern Ukraine and flout international legal norms elsewhere. The renewal of sanctions is a sign that Russia’s efforts to sow divisions between European countries, especially by courting Hungary and Greece, have yet to pay off.

Much about the Belgian ruling remains unclear. Russian media reported Wednesday that a court had ordered the seizure of some non-diplomatic Russian assets. The Belgian and Russian embassies in Washington did not respond to requests for comment. Representatives for former Yukos shareholders weren’t immediately available for comment.

If the initial reports are correct, the Belgian justices would effectively be hammering Moscow for failing to actually comply with the ruling from the arbitration panel in The Hague and pay back the money. That left little recourse for Yukos’s former shareholders other than trying to get courts around the world to seize Russian state assets when and where they can. The company representing the former shareholders of Yukos, GML Ltd., is reported to be seeking similar judicial actions in other countries, including the United States, the United Kingdom, France, Germany, and the Netherlands.

Photo credit: ALEXANDER NEMENOV/AFP/Getty

Keith Johnson is a senior staff writer at Foreign Policy. Twitter: @KFJ_FP

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