What are the governance issues that arise from this case?

As Russia pleads with the International Monetary Fund for money to keep it from defaulting on its international debts, the country's Government seems to believe that an I.M.F. seal of approval will lead to a resumption of the flow of private capital into the country. Don't bet on it. To understand why private investors should be hesitant, consider the case of Yukos, Russia's second-largest oil producer, which is run by Mikhail Khodorkovsky, a well-connected Russian oligarch. The tale is a complex one, in which paper is shuffled as rapidly as aces in a game of three-card monte, in which judges with no apparent jurisdiction issue rulings, and in which oil is sold for absurdly low prices. The losers are investors in the three oil companies that Yukos controls, known as Yuganskneftegaz, Samaraneftegaz and Tomskneft. Once those were hot stocks; now they are all but unsaleable. An investment of $3,000 at the end of 1996, divided equally among the three, would have grown to more than $11,000 by the following August. Now it is worth about $150, down 98 percent. World oil prices are depressed, and Russia's economy is in crisis. But those factors are not enough to account for the decline in share prices, in which one subsidiary that produces oil worth $2 billion a year now is valued at about $22 million. The price has tumbled as it became clear that the shareholders would not benefit from the sale of that oil. This has happened despite Russian laws that purport to provide protection for minority investors by giving them representation on corporate boards and the right to veto deals smacking of conflict of interest. At shareholder meetings of the three subsidiaries last month, plans were approved to allow Yukos to buy oil from the subsidiaries for three years at $1.50 a barrel, about a tenth of the world oil price. Those meetings also approved issuing huge quantities of shares to unnamed investors in return for promissory notes issued by other Yukos subsidiaries. That will dilute the rights of other shareholders. What happened to the Russian laws giving rights to minority holders? Groups of such owners had vowed to defeat the proposals, but they were barred from voting. A judge had ruled that since the minority holders all planned to vote the same way, they must be in league with one another and therefore in violation of antitrust laws because they had not registered as such. The minority shareholders were not invited to the hearing that led to the ruling. The shareholders managed to get another judge to rule that they could vote at one of the meetings. But his ruling was simply ignored. Mr. Khodorkovsky claims the whole fight is about Western investors who have illegally acted in concert and are trying to block good management, but the investors say that the Yukos actions are appalling even by Russia's low standards. ''No one can believe that anyone would be so blatantly crude,'' complains Michael Hunter, the president of Dart Management and a director of one of the subsidiaries, adding that Dart underestimated the level of corruption when it made its investments. John Papesh of Misoli Enterprises, an affiliate of Dart, argues that ''This brazen asset grab takes the violation of Russian law and international standards of corporate governance to a new low.'' If the Russian Government does nothing to protect the shareholders, it will send a clear message. But even an honest government cannot protect investors without help. The Yukos tactics are reminiscent of the fight for control of the Erie Railroad in 1867 and 1868. Cornelius Vanderbilt tried to buy a majority of the stock, only to find that directors led by Jay Gould were printing more shares. Both sides got judges to issue rulings, amid suspicions of bribery. For a time, Gould could not enter New York except on Sunday, when the custom of the time barred people from being arrested. The minority shareholders, most of them from England, were treated badly. None of that kept the United States from becoming the world's premier economy. Along the way such abuses led to the rise of J. P. Morgan, whose early power came from the fact that English investors trusted him. If Russia is ever to become an economic success story, its oil will play an important role. But before that happens, a Russian Morgan -- someone who understands Russian capitalism and earns the trust of overseas investors -- will have to come along to assure that a dollar invested is not sure to become a dollar stolen. The Yukos affair shows Russia is a long way from that goal.