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MOSCOW - In an escalation of its battle with the Russian business elite, the government seized control of oil giant Yukos on Thursday afternoon, freezing a large block of shares in the world's fourth-largest petroleum producer.

Prosecutors said most of the shares are owned by Yukos Chairman Mikhail Khodorkovsky, the 40-year-old multibillionaire who was arrested Saturday at gunpoint by federal agents wearing black ski masks.

He has been charged with seven criminal counts that include fraud, forgery, embezzlement and tax evasion.

Khodorkovsky, now in a Moscow prison cell, has called the charges "absurd."

Critics say the arrest of Khodorkovsky, who has financially supported opposition parties, was politically motivated.

Business leaders warn that the arrest and seizures will disrupt the economy, but the government's moves against Yukos are sure to play well with workaday Russians, many of whom are angry at wealthy businessmen for snapping up old Soviet properties at rock-bottom prices. That anger - and the Kremlin's all-out strategy against Yukos - could be a major factor in parliamentary elections on Dec. 7.

Prosecutors said the shares amounted to 44 percent of Yukos and were frozen as a hedge against possible damages in upcoming tax-evasion cases against Khodorkovsky and two fellow executives - Platon Lebedev and Vasily Shakhnovsky.

Lebedev, a billionaire and a longtime friend of Khodorkovsky, has been in jail since July 2 on tax-evasion charges. Shakhnovsky was recently elected to the Federation Council, Russia's version of the U.S. Senate, which gives him full immunity from prosecution. The Kremlin is trying to have his election annulled.

A Yukos spokesman, Alexander Shadrin, quickly condemned the government's actions as "the grossest violation of the criminal procedure code and the Russian Constitution."

"Russian businessmen are feeling very uncertain now," said Yevgeny Yasin, a professor at the Higher School of Economics in Moscow. "They're all asking themselves, 'When will my turn come?' "

Russian President Vladimir Putin tried to calm those uncertainties Monday by saying there would be no further probes into the dubious privatizations of the early 1990s, the shady deals that turned old Soviet industries into modern Russia's largest conglomerates. Putin also called for "an end to the speculation and hysteria" in financial and political circles.

Meanwhile, there has been havoc in Putin's inner circle. The president's chief of staff, Alexander Voloshin, was so outraged by Khodorkovsky's arrest that he offered his resignation over the weekend. Putin reportedly asked him to stay through the Dec. 7 parliamentary elections, but accepted the resignation late Thursday.

"One of the consequences of all this could be a real change in the power structure in Russia," said Sergei Markov, a political analyst with close ties to the Kremlin. "There are now two big bureaucratic forces around Putin. There's the business-oriented group, which includes Voloshin, and on the other side are the security agencies. This is a dangerous power struggle."

Yasin and other analysts say Russia's oligarchs - the super-rich business elite - are terrified that the government's move against Yukos is the first in a series of attacks on them and their companies. A number of Russia's current business empires - especially in banking, mining, manufacturing, minerals, oil and gas - grew out of rigged auctions as Soviet state-owned property was privatized a decade ago.

Copyright © 2003 Knight Ridder/Tribune Information Services. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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