A Moscow court on Monday found tycoon Mikhail Khodorkovsky guilty in his second fraud trial, a judgement seen as a pivotal moment in Russia's post-Soviet history that rang alarm bells in the West.

A Moscow court has found jailed tycoon Mikhail Khodorkovsky, seen here in court, guilty in his second trial on charges of embezzlement in a judgement seen as a watershed in the country's post-Soviet history. Photo: AFP

Khodorkovsky and co-accused Platon Lebedev were convicted of embezzlement and money laundering, said judge Viktor Danilkin, dashing the hopes of Russian liberals that the trial would show a new approach from Russian courts.

The US led some stinging Western reaction, with the White House saying it was "deeply concerned" about the "selective application of justice". Germany called it a step backward for Russia.

The pair were charged with embezzling 218 million tons of oil from Khodorkovsky's Yukos oil giant between 1998 and 2003 and laundering 487 billion rubles (US$16 billion) and $7.5 billion received from the oil.

"This is an unjust verdict by a court that is not free," Khodorkovsky's lead lawyer Vadim Klyuvgant told journalists.

"It is shameful for the country. We will appeal the verdict."

Amid chaotic scenes, only a handful of reporters were allowed into the courtroom for the verdict and judge Danilkin then requested even those journalists to leave as the rest of the verdict was read out.

"The court has established that M. Khodorkovsky and P. Lebedev committed embezzlement acting in collusion with a group of people and using their professional positions," said Danilkin in the judgement.

Both reacted impassively to the judgement in the glass-fronted defendants' cage in the packed courtroom, Khodorkovsky leafing through papers and looking into the air while Lebedev appeared to be reading a book.

Hundreds of supporters gathered outside the court shouted "Russia without Putin" and "down with the police state" and an AFP correspondent saw police arresting 20 people.

The court adjourned Monday evening until 0700 GMT Tuesday and it was not clear when the final sentence would be delivered. Defence lawyers expressed hope it would come by the end of the year.

Once the country's richest man and now its most prominent prisoner, Khodorkovsky, 47, is already serving an eight-year sentence for fraud on charges his supporters insist were trumped up by the authorities.

But with his release scheduled for 2011, Khodorkovsky was put on trial last year on charges of money laundering and embezzlement that could see the head of the now-defunct Yukos oil giant stay in jail until 2017.

The verdict was watched as a possible indicator of Russia's future direction under Prime Minister Vladimir Putin and President Dmitry Medvedev, amid speculation that Putin is planning a return to the Kremlin in 2012 polls.

Liberals had hoped an acquittal would send a signal to the West that Russia was serious about reform and displaying the independence of its judiciary.

"The judge would have had to have been a hero to have given an acquittal verdict," Lyudmila Alexeyeva, one of Russia's best known rights defenders, told the Interfax news agency.

White House spokesman Robert Gibbs, traveling with President Barack Obama in Hawaii, said the US was "troubled by the allegations of serious due process violations, and what appears to be an abusive use of the legal system for improper ends."

He added that the "apparent selective application of the law to these individuals undermines Russia's reputation as a country committed to deepening the rule of law."

German Foreign Minister Guido Westerwelle said that "the way the trial has been conducted is extremely dubious and a step backward on the road toward a modernization of the country."

Britain had a more muted reaction, stressing to Russia that the law should be applied in a "non-discriminatory and proportional way" while also welcoming Medvedev's "focus on the need to strengthen the rule of law," the foreign ministry said.

Moscow's Khamovnichesky court had been due to start reading the verdict on December 15, but unexpectedly postponed the announcement without giving an explanation.

The next day Putin compared Khodorkovsky to US fraudster Bernard Madoff, jailed for 150 years, and observed that a "thief must be in prison".

Khodorkovsky hit back against Putin in a newspaper article on Friday, saying he pitied a man who could only feel love for dogs.

The pursuit of Khodorkovsky has been the most controversial legal action of the post-Soviet era in Russia.

Like many other billionaires, Khodorkovsky made his fortune in controversial loans-for-shares privatization in the 1990s but his supporters say he turned Yukos into Russia's most transparent company.

Source: AFP