Yukos and the risk to globalization

The crux of the problem is that the head of Yukos, Mikhail Khodorovsky, has supported opposition candidates to Russian President Putin and as a result Putin has decided to charge the founders of Yukos with failing to pay three billion dollars in back taxes. The solution is for Yukos to pay their tax bill or get a compromise from the Russian government. Yukos does not owe three billion dollars to the Russian government but Putin has decided to make an example of anyone who would threaten his rule. Even worse, Putin will not grant them access to their bank account to pay the bill.

So much for the concept of democracy in Russia and we believe the markets are more concerned about the implications of whether globalization can work in such an environment. Meanwhile, everyone seems concerned only that the Russian oil supply will be cut off until a solution is reached over the Yukos tax bill which is causing oil price to spike. The bigger issue in Russian and the Middle East is can democracy thrive? If the answer is no, then globalization may be in serious trouble. This is a much more serious issue than the price of crude and the market is aware of the risks.