Russian court upholds Khodorkovsky conviction

MOSCOW (Reuters) - A Russian appeals court upheld a multi-billion-dollar theft and money laundering conviction against jailed former oil tycoon Mikhail Khodorkovsky on Tuesday and reduced his 14-year prison sentence by one year.

The court rejected an appeal by Khodorkovsky, once Russia's richest man, against his December 30 conviction in a trial seen by his supporters as a test of President Dmitry Medvedev's promises to improve the rule of law.

Khodorkovsky, 47, and his business partner Platon Lebedev, were initially convicted of fraud and tax evasion in a separate trial in 2005.

The court "imposes on Khodorkovsky and Lebedev punishment in the form of imprisonment for a term of 13 years," Judge Olga Arochkina said after the one-day hearing of their appeals.

The Moscow City Court ruling means former Yukos oil company chief Khodorkovsky, who fell foul of the Kremlin during Vladimir Putin's presidency and has been jailed since 2003, will remain in prison well into 2016.

One of Khodorkovsky's lawyers, Karina Moskalenko, called the one-year reduction of the sentence "cosmetic" while Amnesty International declared Khodorkovsky and Lebedev "prisoners of conscience."

Khodorkovsky, wearing a black shirt and watching from a glass-walled cage in the courtroom, smiled to his relatives as the judge read out the court's decision. Supporters outside the courtroom protested, calling the decision a "disgrace."

Khodorkovsky's lawyer Vadim Klyugvant said they would appeal against the decision "at all Russian and international levels available to us by law," making an apparent reference to the European Court of Human Rights.

In December, the trial judge who convicted Khodorkovsky sentenced him to serve a total of 14 years in prison, counting from his initial arrest at a Siberian airport in October 2003.

Government critics describe the prosecution of Khodorkovsky as part of a Kremlin campaign to tighten state control over oil revenues and punish the tycoon for perceived challenges to Putin, president from 2000-2008 and now prime minister.

"We have become witnesses to yet another act of shameless, selective and illegal political massacre, which has already been going on for eight years and is directed at targets outside of the realm of justice," said defence lawyer Yuri Shmidt.

STOLEN OIL

Khodorkovsky's lawyers protested last year after Putin, speaking on a nationally televised question and answer session responded to a question about the former magnate saying, "a thief must sit in jail."

Western governments have condemned the December verdict, saying it raised questions about Russia's commitment to the rule of law.

U.S. officials and prominent members of the Russian elite have warned the second conviction could discourage new investment in the country.

An aide to trial judge Viktor Danilkin, who declared Khodorkovsky guilty last year, stepped down in March after she said the verdict had been dictated from above.

Khodorkovsky is charged with stealing billions of dollars of oil from Yukos subsidiaries through price mechanisms and laundering some of the money.

"The prosecution is obviously absurd, because all our oil was given to the state company Transneft. No oil has disappeared either physically or on paper," said Khodorkovsky to the court.

Yukos produced more crude than OPEC-member Qatar at the height of its success.

Critics of the trial say the verdict and sentence were designed to keep the politically ambitious former businessman from challenging a favoured candidate in next year's presidential election.

Both Putin, whose first term as president was defined by Khodorkovsky's earlier trial, and Medvedev whom Putin steered into office in 2008 have said they may run in next year's poll.

(Writing by Thomas Grove; Editing by Maria Golovnina)

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