State Urges Caution in Russians Oil Dispute

The Bush administration urged Russia on Thursday to set aside any political considerations in its legal fight against the oil giant Yukos and jailed billionaire owner Mikhail Khodorkovsky (search).

As oil prices resumed their rise after a two-day drop, causing sharp declines in the United States and other financial markets, the State Department said "all parties need to arrive at a solution that resolves this case in accordance with the rule of law and due process."

Department spokesman Adam Ereli, in issuing the statement at a daily press briefing, said that means the Russian legal system should not be influenced by "political considerations."

The statement followed similar appeals by Secretary of State Colin Powell to Russian Foreign Minister Sergey Lavrov (search) at the NATO (search) summit in Istanbul, Turkey, in June, and by Assistant Secretary of State Elizabeth Jones in talks with Russian officials in Moscow in July.

"In our view, the appearance of a lack of due process and threat to private property rights have resulted in both the Russian and the international business communities being on their guard," Ereli said.

And, the U.S. spokesman said, "the way the case has been handled also raises questions about respect for investment rights in Russia."

Ereli said it has led to increased capital flight from Russia and a decline in new investment that is hurting its economy.

He described the U.S. stance as one of offering "guidelines" and "standards" to Russian authorities, At the same time, Ereli declined to say how the squeeze on Yukos might affect oil markets.

"I don't want to speculate about market fluctuations or impacts," he said.

With all its troubles, Yukos still pumps one-fifth of Russia's oil. Its production assets have not been nationalized. But concern about the future of the oil giant has helped push crude prices to record levels.

Analysts say output cuts or a state takeover of the company would propel prices even higher, threaten Russia's production growth and jeopardize its international standing.