Russia's financial community braced Monday for sinking market prices and waited for a sign from President Vladimir Putin after oil magnate Mikhail Khodorkovsky was arrested and held in a Moscow jail.

Khodorkovsky, Russia's richest man and head of oil major YUKOS, was snatched from a plane in Siberia Saturday, whisked to Moscow, charged with fraud and tax evasion and ordered held pending further investigation.

Russia's richest man, the chief executive of the oil giant YUKOS, Mikhail Khodorkovsky listens to journalists' questions during his news conference in Moscow in this Oct. 20, 2003 file photo.  [Reuters]

Liberals, including some backed by Khodorkovsky against Putin's allies in December's parliamentary elections, denounced the action. Some said only an assurance from Putin on the future of Russian business would calm investors.

Market sources said Russia's biggest brokerages and market participants were conferring to determine how best to avoid a dramatic drop in share prices after the market opened Monday.

"Khodorkovsky's arrest is as serious as September 11 was for the United States. So they are using the same procedure," said one source, referring to meetings by market participants after the 2001 airliner attacks on New York and Washington.

Some investors feared an early market jolt.

"There will be a dramatic stock decline, not just a correction," said Bulat Karimov at Aton Brokerage. "The head of Russia's biggest public company is under arrest and this company is responsible for 30 percent of market turnover."

Others saw longer-term damage.

Yevgeny Yasin, former economy minister and now head of the State Higher Economy School, said the arrest "might not have a noticeable effect" on the stock market's benchmark RTS index.

"Over time, it will hit our balance of payments, capital flight will increase. It already has," he told Ekho Moskvy radio. "No agency will give us another investment rating."

MOODY'S UPGRADE

That was a reference to Moody's Investor Service awarding Russia an unprecedented investment grade this month, a move which boosted Russian shares and the rouble.

Khodorkovsky heads Russia's biggest oil company, YukosSibneft, created by a merger now under way of YUKOS with smaller rival Sibneft. U.S. oil majors Exxon Mobil and Chevron Texaco are thought to be interested in purchasing a stake in it.

He has been in cat-and-mouse confrontation with authorities for months. One of YUKOS's major shareholders has been detained and charged and firms linked to YUKOS have undergone searches.

But unlike other "oligarchs" who were close to Putin's predecessor Boris Yeltsin, like media magnates Boris Berezovsky and Vladimir Gusinsky, he has vowed to remain in Russia.

Putin, heavily favored to win a second term next year, has said nothing about Khodorkovsky's detention. Cautious throughout the row, he has nonetheless said economic crimes should be punished without measures like incarceration in most cases.

Boris Nemtsov, head of the Union of Right-Wing Forces, one of two liberal parties financed by Khodorkovsky, denounced the move against Khodorkovsky as an "act of intimidation."

Anatoly Chubais, the head of Russia's power grid who oversaw the chaotic privatizations of the 1990s, said there was great unease over the actions of law enforcement agencies.

"This process is worsening before our very eyes," he told Ekho Moskvy. "Nothing can be put right without the president."

A senior executive of Russia's top business lobby, in comments scant days before Khodorkovsky was charged, said business wanted no part of long-term conflict with authorities.

"I do not wish to see the dispute between prosecutors and YUKOS become an endless, smoldering conflict like that pitting Israel against the Palestinians," said Igor Yurgens, deputy head of the Russian Union of Industrialists and Entrepreneurs.

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