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The U.S. and German governments have also raised concerns about the Khodorkovsky case, asking for assurances that the arrest was legal. "It looks more and more like this is a very selective prosecution, for political reasons," says a senior U.S. State Department official. "These things get expressed. They get raised with the Russians." The Kremlin took offense at this, saying through the Foreign Ministry that such protests are "tactless and disrespectful."

Putin himself took pains to downplay the significance of the arrest. "I would ask that all speculation and hysteria about this be stopped," he said in a televised address. Three days later, he met in an opulent conference room at the Kremlin with a group of international bankers, including representatives of Deutsche Bank, Morgan Stanley and Goldman Sachs. He assured them that he wasn't nationalizing the company, but simply freezing its assets so they would be available to settle the criminal claim. He said the moves against Khodorkovsky don't herald any shift in the Kremlin's pro-business policies. Indeed, he said he hadn't known about the Yukos stock seizure in advance, and was 10 minutes late for the meeting because the prosecutor general's office had just briefed him on it. But the businessmen weren't assuaged, and many Russians are skeptical. "Nothing of this kind can happen at the Kremlin without the President's knowledge, order or acquiescence," says Lilia Shevtsova, a political analyst with the Carnegie Moscow Center.

Khodorkovsky's arrest could take a toll on growing international confidence in the Russian economy. The ratings agency Moody's recently upgraded Russia's sovereign credit rating in a move that seemed likely to encourage greater foreign investment. But any further signs that Russia is backsliding could have a chilling effect on foreigners and accelerate capital flight out of the country. Indeed, in the four months since Yukos has been in the firing line, an estimated $7.7 billion left Russia, a shocking reversal from the net $3.7 billion that entered the country in the second quarter. Yevgeny Yasin, an Economics Minister under Yeltsin in the 1990s, estimates that the flight will now accelerate.

For the moment, big foreign players continue to give Putin the benefit of the doubt. "Nothing that has happened over the past few days will change our attitude," said Lord Browne, the chief executive of British oil giant BP, which recently finalized a $6.8 billion Russian venture. "We haven't changed our long-term perspective," concurs Peter Elam Håkansson, who manages a $250 million Russian stock fund out of Stockholm for East Capital. The fund is up about 100% this year to date, and Håkansson was using the market declines last week to buy up more stocks. "We know we have to handle risk," he says, but "it's still one of the most exciting places to invest your money."

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nginx/1.14.0 (Ubuntu) Russia's super-rich oligarchs have been frequent political targets over the past decade; attacking them can be a vote winner because many Russians are deeply suspicious of the loans-for-shares scheme under which Russian industries were privatized — and through which these businessmen got their wealth. Two big players during the '90s — Boris Berezovsky and Vladimir Gusinsky — have fled into exile. More recently, Roman Abramovich, a Siberian provincial governor, sold his oil company Sibneft to Yukos and bought Chelsea Football Club. (So far, Putin's remarkable popularity is holding up: in a VTsIOM-A poll conducted last week, the President had a 73% approval rating.) But Khodorkovsky is a different kind of oligarch. For one thing, he has become something of a socially-minded philanthropist. Yukos spends about $100 million per year on projects that include training thousands of high school teachers to use the Internet in the classroom and sending Russian teenagers to U.S. schools for a year. It also enjoys a reputation among foreign investors as perhaps the most transparent and westernized company in Russia. It has a cluster of Americans on its board and among top management, uses U.S. accounting standards and was the first major Russian company to detail its precise ownership structure. Most recently, it has been engaged in talks with both ExxonMobil and ChevronTexaco about the possible sale of as much as 40% of its equity, according to people familiar with the talks. While such a move would have amounted to a resounding vote of confidence in Russia's economic future, it also might have put Khodorkovsky and Yukos out of Putin's reach. The talks are now on hold. But the idea was characteristic of Khodorkovsky. "He's the ideal opportunist," says Anders Aslund, director of the Carnegie Endowment's Russian program, who has known him for six years. "He's at the top of any game there is."

Khodorkovsky was born in Moscow in 1963 to a-lower-middle-class Jewish family. A straight-A high school student, he earned college degrees from two of Moscow's most prestigious schools by the age of 25 and then got into politics. When Mikhail Gorbachev, who was then the Soviet President, started introducing political and economic reforms in 1986, Khodorkovsky was deputy chief of a Young Communist League (Komsomol) district committee in Moscow. It was a giddy new world of cooperatives and other legal private business opportunities and, like many Komsomol leaders, Khodorkovsky used the organization's vast real-estate holdings and political connections. "He dealt in everything: blue jeans, brandy and computers — whatever could make money," says a senior Yukos executive.

Not all his initial business forays turned out well, and from time to time he used his skills as a trained carpenter to supplement his income. But it was back then that he built the team that later was to emerge as Yukos top management — Platon Lebedev, Leonid Nevzlin, Mikhail Brudo and Vladimir Dubov. Soon they ran a network of enterprises reaching as far away as Siberia. The breakthrough came in 1988, when Khodorkovsky launched a commercial bank called Menatep. To help get it started, Gorbachev's administration gave it the right to handle Chernobyl victims' relief funds.

After the collapse of the Soviet Union, some accused Menatep of laundering Communist Party money, but the allegations were never proved. As his empire grew, Khodorkovsky acquired riches but shunned the flashy lifestyle, preferring modest clothes and cheap plastic watches. Even now, he prefers turtlenecks and leather jackets to designer suits.

He made his first million dollars in the early 1990s, when Menatep used its connections to buy large amounts of shares in companies that were being privatized. After a brief stint in the federal government, taking on the job of Deputy Fuel and Energy Minister between 1993-1994, he staged his biggest coup, acquiring Yukos at a state auction for $350 million in 1995.

Critics today accuse Khodorkovsky of grabbing valuable assets for peanuts. While it's true he paid relatively little for Yukos, the company was flat on its back, owing about $3 billion in taxes and unpaid salaries to employees. It was also torn by labor strife. Yukos executives says it took two years of crisis management before the firm got back into shape — only to be sent reeling in 1998 by falling oil prices and Russia's economic crisis. To make matters worse, Khodorkovsky suddenly found himself with a big fight on his hands when foreign shareholders, led by Kenneth Dart, the heir to an American foam-cup fortune, mounted numerous legal challenges to the way he gained control of the operations and cash flow of Yukos subsidiaries, allegedly to the detriment of minority holders.