Khodorkovsky was reportedly arrested while his private jet was refueling at an airport in Siberia. The Yukos chief is now facing seven charges of fraud and tax evasion, which carry a maximum penalty of 10 years' imprisonment.

He has been charged as an individual and as head of Yukos, which is in talks to sell a big stake to ExxonMobil. The arrest was a culmination of a months-long legal attack on Yukos's core shareholders, which is believed to be fuelled by Kremlin conservatives eager to curb Khodorkovsky's growing political influence.

Khodorkovsky's fortune is reportedly founded on cheap assets acquired from rigged auctions when the Soviet Union collapsed in 1991, while he has openly financed opposition parties in the lead up to parliamentary elections next month and presidential elections expected in March.

"He created the first transparent company. Yukos pays more than $2.87 billion in taxes - the company is completely transparent," centrist parliamentarian Vladimir Ryzhkov told Moscow Echo radio.

However, some analysts believe the government's move is more politically motivated than legally as Kremlin conservatives fear running against a powerful opponent with massive financial backing.

Following a merger with rival Russian firm Sibneft, Yukos has grown to become the world's fourth-largest oil producer with the world's biggest oil reserves and producing a third of Russia's crude.

It is now feared that the arrest will have a severe impact on the burgeoning Russian market, which is in the greatest period of sustained growth since the market implosion of August 1998 when Russia defaulted on its foreign debt and devalued the ruble while erasing the investments of millions.