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A Moscow judge found Mikhail Khodorkovsky, the jailed former head of Yukos Oil Co., guilty of embezzling crude, adding to a 2005 conviction, in a trial that has raised European concerns about the rule of law in Russia.

Khodorkovsky and his former business partner Platon Lebedev, already serving eight-year sentences for fraud and tax evasion, may be sentenced this week or after Jan. 10 when Russia’s New Year holidays end, their lawyers said. The men face six more years in prison, the defense team has said.

“The trial was a charade of justice, the charges were absolutely false, but I fear the sentencing will be very real,” Vadim Klyuvgant, the lead defense lawyer, said today in a statement. The defense team plans to appeal the decision, he told reporters outside the courtroom. “There isn’t the slightest doubt that there was pressure on the court.”

Khodorkovsky, 47, was due for release in October next year. Once Russia’s richest man, Khodorkovsky has called the charges retribution for political opposition to Prime Minister Vladimir Putin, who was president at the time of his 2003 arrest. Putin has denied any involvement.

‘Highly Worrying’

U.S., German and U.K. officials said the trial undermines confidence in Russia’s commitment to a fair legal climate for business.

The case “raises serious questions about selective prosecution — and about the rule of law being overshadowed by political consideration,” U.S. Secretary of State Hillary Clinton said in a statement today. The U.S. will monitor the case and others, which have a negative impact on “Russia’s reputation for fulfilling its international human rights obligations and improving its investment climate,” she said.

The European Union said it was following the proceedings “very closely.”

“The circumstances of the trial are highly worrying and a step back on the country’s way towards modernization,” German Foreign Minister Guido Westerwelle said in a statement.

Richard Ottaway, chairman of the U.K. parliament’s Foreign Affairs Select Committee, said in a statement that the outcome “has serious implications for the confidence of overseas investors and on British investment in Russia.”

Khodorkovsky’s parents sat in the front row, listening to the reading. Supporters gathered in the street chanting “freedom,” which could be heard inside the court. The police detained as many as 20 activists, Interfax reported.

Speaking in an annual call-in show with the nation on Dec. 16, Putin said that “a thief should sit in jail,” referring to Khodorkovsky’s 2005 conviction. During Putin’s presidency, Yukos, once Russia’s largest oil exporter, was bankrupted amidst about $30 billion of tax claims and sold off in pieces.

Kremlin Elections

Khodorkovsky’s wife, Inna, said she expected her husband to remain in jail until at least 2012, when a presidential election will be held that could return Putin to the Kremlin for 12 years.

“My husband will stay in prison until at least 2012, and after that who knows what will happen? No one does,” she said in an interview with Snob magazine published Dec. 25. “No, I don’t believe in that,” she said when asked if Judge Viktor Danilkin, presiding over the trial at Moscow’s Khamovniki District Court, might acquit Khodorkovsky.

Prosecutors have been seeking a 14-year sentence for Khodorkovsky and Lebedev on charges of stealing about 219 million tons (1.6 billion barrels) of oil from Yukos. Khodorkovsky’s lawyers say time already served on their eight- year prison terms will be deducted if he’s convicted in the current trial.

‘Irritants’ to Investors

Khodorkovsky’s imprisonment is “one of the irritants that investors traditionally react to,” German Gref, chief executive officer of OAO Sberbank, Russia’s largest lender, said in an interview earlier this month.

“We have our work cut out for us to improve the investment climate,” said Gref, who was economy minister when Khodorkovsky was arrested. The case is “one episode, but we have systemic issues that aren’t resolved,” such as property rights, the judiciary and law enforcement, he said.

A full conviction and long sentence is already priced into the markets, and won’t cause more than a shrug in equity, debt or currency performance, said Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow.

The 30-stock Micex Index declined 0.7 percent at 6:10 p.m. in Moscow today, tracking a decline in Asian stocks.

‘Sideshow’ to Investors

“Investors already active in Russia have factored it in as a sideshow,” Weafer said in a research note. A reduced conviction would be “positive factor for those strategic and portfolio investors that remain distant from Russia,” he added.

Russia is the world’s most corrupt major economy, according to Berlin-based Transparency International’s 2010 Corruption Perceptions Index released on Oct. 26, sliding to 154th among 178 countries and placing it alongside Tajikistan and Kenya.

Khodorkovsky has ruled out the possibility of an acquittal and said he’s prepared to die in jail. The verdict will be “predictable,” he said in his closing statement at the trial on Nov. 2. “No one believes that you can get an acquittal in the Yukos affair in a Moscow court.”

Photo: Mikhail Khodorkovsky listens to a verdict from behind bars at a court room in Moscow, Monday, Dec. 27, 2010.

Bloomberg

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