A fine award

Yukos ruling casts Russia further into the cold

Russia's past has returned to haunt it with a $50-billion ruling in favour of the former shareholders of Yukos, the oil company it expropriated in 2003. Moscow will no doubt appeal the decision of the Permanent Court of Arbitration in The Hague. If and when the decision becomes final, Russia could still refuse to indemnify the plaintiffs. Then it will face many unpleasant years, with Russian state assets in the West liable to be seized by the claimants in lieu of damages. Unless, that is, some form of settlement is reached first.

News of the ruling sent the Moscow stock market down two per cent on July 28. Shares in Rosneft, which took over most of Yukos' assets, are down 14 per cent this year. Were Russia to pay up, the penalty would be equivalent to about thee percent of GDP. That's especially painful as Western sanctions over Ukraine start to bite: they have already hurt Rosneft.

The 579-page court decision, made on July 18 and published 10 days later, is damning for Russia. It condemns the way authorities behaved at the time, and the country's shady legal system - which punished Mikhail Khodorkovsky, then Yukos' top shareholder, with a 10-year prison term.

So, expect Moscow to mount an intense legal fight to have the judgment overruled. Yet, if reason played a part in the Kremlin's way of thinking, it would try to strike a deal with the claimants. Especially as another tribunal - the European Court of Human rights - is due to rule this week on a similar case brought by Yukos' former management. Khodorkovsky says he wasn't a party to the lawsuits - he long ago ceded his 70 per cent stake in the entity that would benefit from the ruling to an associate, Leonid Nevzlin, who now lives in Israel. So, if it settled, the Russian government would at least not lose face for making a former foe rich again. For the moment, though, it seems focused on denying it ever did anything wrong.