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Court decision awaited for detained YUKOS investor
By Dmitry Zhdannikov

MOSCOW, July 15 (Reuters) - A conflict pitting Russian oil giant YUKOS <YUKO.RTS> against the Kremlin moves closer to a climax on Tuesday with a Moscow court due to set a date to put one of the firm's billionaire core investors on trial.

YUKOS said it hoped a court session would take place soon to determine the fate of Platon Lebedev, in detention for 10 days and charged with theft of state property.

Many see legal action against Lebedev as a Kremlin-inspired move to curb YUKOS's growing political influence.

"If the date for the case hearing is set for the coming days, then we can quickly win, as the whole case will simply collapse in the absence of evidence," one of YUKOS's major shareholders told Reuters on Tuesday.

"But we fear the authorities will prefer to set the date as late as possible to come up with new arguments," said the shareholder, who asked not to be identified.

The row erupted on July 2 when Lebedev was detained while in hospital and taken away in handcuffs and then charged with theft of state property over his part in a 1994 privatisation.

YUKOS Chief Executive Mikhail Khodorkovsky, Russia's richest man, was later called in for questioning and then allowed to go.

Khodorkovsky has thrown his support behind the liberal opposition which is set to challenge Putin, who is almost certain to run in next year's presidential elections.

Masked, armed police searched YUKOS office for 16 hours last Friday.

DAMAGE TO BUSINESS CLIMATE

Analysts and business leaders have said the row is damaging Russia's investment climate and have called on President Vladimir Putin to step in and restore calm by ensuring the rule of law prevails.

The analysts say action against YUKOS reflects a complex power struggle within the Kremlin between a liberal faction of remaining allies of former president Boris Yeltsin and Putin's new backers with roots in the security forces.

Both sides hope to hold sway over the president after his widely predicted victory next March.

"I think YUKOS is not the main target today," a key business figure told Reuters. "There is a fight to win the president's full support."

Putin's top economic adviser, Andrei Illarionov, warned on Monday that the way the raids were carried out could have a negative impact on the reputations of Russian business, the prosecutor's office and the security forces in general.

Both Putin and Prime Minister Mikhail Kasyanov have weighed in to say the arrest and the armed search appeared heavy-handed.

But analysts called on the country's leaders to be unequivocal in denouncing the practices.

"On Monday, the president again skilfully circumvented the issue during a cabinet meeting," Nikoil brokerage said in a research note.

International ING and Moscow-based UFG brokerages said an evasive approach could cast further doubt on Russia's investment climate, only months after oil major BP <BP.L> decided to go ahead with a multibillion-dollar investment.

ING said the conflict could undermine healthy growth, reduce foreign direct investment and reignite capital flight.

Khodorkovsky is due to return to Moscow on Tuesday or Wednesday after spending the weekend in the United States attending the Sun Valley conference of influential executives.

YUKOS is due to acquire its smaller rival Sibneft <SIBN.RTS> by the end of 2003 in a deal valued at $12-$15 billion to become Russia's largest and the world's fourth biggest private oil producer. YUKOS said on Monday the deal was still in place.

"I would not say our operations are proceeding in totally normally fashion, but all our main projects, including the deal with Sibneft, are moving ahead," said Vasily Shakhnovsky, head of YUKOS-Moskva affiliate.

YUKOS shares were trading at $12.12 at 0825 GMT on Tuesday, a 1.0 percent rise on Monday's close. They were trading at over $14 before Lebedev's detention.

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