The arrest of businessman Mikhail Khodorkovsky and blocking of his shares in YUKOS oil have alarmed investors and stoked tensions between President Vladimir Putin?s secretive Kremlin and the business community. The high stakes and complex case is unpredictable and the following are possible scenarios as to how events may unfold:

-AFFAIR BLOWS OVER

Political analysts, brokers and economists contacted by Reuters believe it?s unlikely the case will simply blow over but such a development might happen something like the following:

Khodorkovsky is released from jail after presidential elections in March 2004 which Putin wins comfortably. The oil tycoon in return for his freedom agrees to refrain from political activity ? widely believed to be the root cause of his judicial woes ? and quietly returns to running his business but keeps a far lower public profile.

Other business oligarchs are left untouched and capital held offshore by rich Russians starts to flood back into the country. Foreign investors are reassured and Putin launches reforms, including a shakeup of bureaucracy, crackdown on corruption and steps to invigorate the rule of law. An amnesty law is passed which provides legal guarantees for big businessmen, who acquired their assets in the 1990s, to keep their possessions.

- WORST CASE

Analysts contacted by Reuters also thought chances were slim a worst case scenario would happen, but it might unfold along the following lines:

A judicial assault on YUKOS?s key shareholders, including Khodorkovsky, intensifies. Other tycoons, known as ?oligarchs? are investigated for alleged misappropriation of assets in a sale of state companies in the 1990s. Panic spreads among investors, capital flees, the rouble weakens and international credit rating agencies lower their ratings to reflect the increased risk of investing in Russia. As the affair snowballs, operations of YUKOS ? which has been completing a merger with its smaller rival Sibneft to create YukosSibneft ? steadily deteriorate.

Russia?s Natural Resources Ministry tears up YUKOS Sibneft?s operating licenses, severely denting its ability to pump oil and generate cash. The company?s stock price collapses. Fresh charges are brought against Khodorkovsky, already accused of tax evasion and massive fraud, fueling doubts over his chances of receiving a fair trial. His shares and property are subsequently expropriated and he is convicted. Western governments, pressed by their own leaders business leaders, complain to Moscow and budding relations turn sour. The widening assault on big business signals breakdown of an informal coalition between ?oligarchs?the Kremlin and the higher reaches of public administration, opening the way to an era of authoritarian rule and state domination of business.

- KHODORKOVSKY ALONE

Those contacted by Reuters agreed the scenario may be along the following lines, but said it could be some combination of all three scenarios. The case against Khodorkovsky rolls on and he and his associates are brought to trial after the elections and convicted. He receives a very large fine. Khodorkovsky and his partners agree to part with his shares in YUKOS, now held through an offshore company, and they are sold to investors favored by the Kremlin. The shares may instead be expropriated and auctioned off, resulting in lengthy litigation through international courts. Rival business oligarchs lie low, keep out of politics and are spared any investigations into their affairs in an uneasy truce with the Kremlin.

Business confidence and the investment climate slowly recover, tempered by caution. Putin stands by public assurances not to overturn the privatizations of the 1990s. After his reelection, Putin proceeds cautiously with economic reforms but keeps a tight rein on the media and exercises strong control over the State Duma.