Interview with Zurich Tages-Anzeiger on Yukos ruling by Permanent Court of Arbitration in The Hague

28 July 2014

Jens Siegert

Source: Boell Foundation Russia Blog

In a ruling published today, the Permanent Court of Arbitration in The Hague ordered the Russian state to pay around USD 50 billion in compensation to former shareholders of the Russian oil concern Yukos, which was dissolved in 2004. They had appealed for compensation from the government on the grounds that the breaking up of the company formerly headed by the government critic Mikhail Khodorkovsky had lost them a great deal of money. Khodorkovsky himself has welcomed the ruling, but emphasised that he himself did not submit a claim and did not intend to derive any material benefits from the ruling. In an interview with the Zurich Tages-Anzeiger, I made a first attempt at analysing the consequences of the ruling. 

Tages-Anzeiger: Mr Siegert, Russia has been ordered to pay a huge sum of compensation in the Yukos case. What does this ruling mean for the Kremlin? 

Jens Siegert: Alarm bells will be ringing even louder among the political classes. The Kremlin is already under pressure as a result of the US and EU sanctions, and a further penalty of over USD 50 billion would be a harsh blow. 

: What are the likely consequences of the guilty verdict? 

Jens Siegert: The Kremlin will start by appealing the case to a higher instance and attempting to wriggle out of the noose by judicial means. Russia could face a major problem if the ruling gains international force, since foreign property held by the Russian state could ultimately be seized if it refuses to pay. 

Tages-Anzeiger: What status does Russia ascribe to the Court of Arbitration in The Hague? 

Jens Siegert: An ambivalent one. Russia is happy to recognise the Court’s authority as long as it decides in favour of the Kremlin, but it can never have intended to abide by a negative ruling. It’s likely that the country was mainly playing for time in lending its support to the proceedings. 

Tages-Anzeiger: A risky strategy in PR terms. 

Jens Siegert: It’s a ubiquitous tactic – events are given whichever interpretation is currently required. Take flight MH17 as an example: the Kremlin will insist that the shooting down of the plane was a crime for as long as it can still reasonably be claimed that Ukraine is responsible. If it turns out that Russian guerrillas brought it down, they will claim the exact opposite and call it a mistake. 

Tages-Anzeiger: Will this strategy also work for the Yukos case? 

Jens Siegert: The Kremlin is likely to publicly accuse the Court of Arbitration in The Hague of being an instrument of the West. Reference will be made to Russia’s sovereignty and the legitimacy of the Court of Arbitration will be called into question, even though Russia explicitly agreed to recognise its judgments only a few years ago. 

Tages-Anzeiger: Will Russia pay the USD 50 billion? 

Jens Siegert
: Russia had already plunged into an economic crisis before the outbreak of the Ukraine conflict, and the current threat of sanctions is making the situation even worse. Against this backdrop, I find it hard to believe that Russia will pay in the immediate future. There will doubtless be a great many delays – we're talking more in terms of years than months. 

: What effect will the ruling have on Putin's popularity? After all, a court has now officially confirmed that the Kremlin is full of thieves. 

Jens Siegert: We knew that anyway – the only question is whether people think this is ok or not. Putin has the public on his side in the Yukos case, even without the latest wave of propaganda. Khodorkovsky is seen as representing the generation of oligarchs who made their fortune in the 1990s at the expense of society as a whole. The majority of people therefore welcome the fact that the Kremlin took Khodorkovsky’s fortune away from him. 

Tages-Anzeiger: Does that mean that the ruling is good news for the Russian president? 

Jens Siegert: The general view in Russia is that ultimately you can only amass a large fortune by stealing. If the Kremlin now labels the demand for USD 50 billion as a political judgment against Russia, it will meet with a great deal of support in the country. 

Tages-Anzeiger: What is the general attitude towards the judiciary in Russia? 

Jens Siegert: Many people find the concept of the rule of law an alien one. People see the law as an expression of power: the court rules in favour of whomever is in charge of the state. The flip side of this is that the powerful do not need to abide by the law. This cynical attitude to the law is deliberately promoted by the Russian leadership, and this has paid off in the case at hand: Putin has been telling the Russian people for years that “Westerners are no better than us”. The idea that the court in The Hague must be politically controlled is entirely logical for many people in Russia. 

Translated by Joanne Reynolds