By Vladimir Isachenkov
The Associated Press

MOSCOW - Caged together in a small, stuffy courtroom, two billionaires went on trial Wednesday in a politically charged case that will send signals to investors about the Kremlin's power over the economy.

Former Yukos oil company CEO Mikhail Khodorkovsky, Russia's richest man, sat alongside his top business partner, Platon Lebedev, in a metal cage in the Meshchansky district court for what was to have been the first substantive hearing in their trial on charges that include fraud and tax evasion.

But Judge Irina Kolesnikova agreed to a defense request to hear only procedural issues until Khodorkovsky's main lawyer, Genrikh Padva, recovers from eye surgery.

Inside the cage, Khodorkovsky exchanged glances with his elderly parents, Marina and Boris, who sat a few feet away, sometimes giving them a comforting smile.

"Everything is OK, you can see for yourselves," Khodorkovsky told Associated Press Television through the bars. Speaking of Lebedev, he said: "We haven't seen each other for almost a year. Now we have a chance to talk. About everything, but mostly our families."

Khodorkovsky appeared calm throughout the proceedings in front of a three-judge panel. Still, the poorly ventilated courtroom led to a break at one point because it was too hot and stuffy. The next hearing is set for Wednesday.

Khodorkovsky was arrested at gunpoint in October, as prosecutors stepped up an investigation into top figures at the giant Yukos firm that began with Lebedev's jailing in July. The two billionaires are charged largely in connection with the 1994 privatization of a big, state-owned fertilizer plant, and both face up to 10 years in prison if convicted.

Both men deny the charges.

President Vladimir Putin has portrayed the investigation of Yukos and its core shareholders as part of Russia's effort to tackle economic crime and corruption. But the targeting of Khodorkovsky at a time when he was raising his political profile in opposition to Putin has led many analysts to suggest that the Kremlin wants to destroy a potential political challenger.

It has also raised international concern that Russia is moving backward on democracy under Putin.

In an editorial in Wednesday's Financial Times, former U.S. Sen. Bob Dole said the trial was taking place in "an environment that reeks of political repression, social regression and re-nationalization of key industries."

Yukos is reeling from its own legal troubles, facing a $3.4 billion tax claim it has said might lead to bankruptcy.

Yukos' stock price fell 3 percent Wednesday, after tumbling 8 percent Tuesday as investors panicked on news that its managers were trying to strike a deal with the government on paying off the tax claim if a court rules Friday that it is legal. The government has not responded to the overtures.

Some foreign investors and other Russian multimillionaires fear the investigation is also an attempt by the government to reclaim some of the natural resources and enterprises sold off in widely criticized 1990s privatizations.

"The focus is on expropriating Yukos, that's the target," said Robert Amsterdam, a Toronto-based lawyer for Khodorkovsky.

Prosecutors claim that in 1994, Lebedev and other Menatep officials won a 20 percent stake in Apatit, Russia's largest manufacturer of a key fertilizer component, through a scheme involving fake bidders. The bidder, which won the shares for a nominal price, never fulfilled its pledge to invest $283 million in the company, they say.