INVESTOR confidence in Russia's energy sector has been badly shaken by the hounding of Mikhail Khodorkovsky and the fate of his oil company, Yukos, which has been brought to its knees after being hit with massive back-tax demands.

However, despite the politically motivated nature of both cases, foreign investors - especially Big Oil - will continue to hunt opportunities in Russia's oil and gas sector because of their pressing need to gain access to large reserves, analysts say.

Yesterday, 18 months after his dramatic arrest at gunpoint, Khodorkovsky was handed a nine-year prison sentence for fraud and tax evasion, following an 11-month trial that is widely seen as orchestrated by the government to punish the oil tycoon for political challenges to the Kremlin. In December, following a separate case, Yukos' biggest oil-producing unit, the one million barrels a day Yuganskneftegaz company, was sold at an auction to state-owned Rosneft to help federal authorities recover a colossal $28 billion in alleged unpaid taxes.

However, despite the destabilising effect the government's campaign ag ainst Yukos and Khodorkovksy has had on the country's investment environment, experts say the length of Khodorkovsky's sentence will have little or no effect on energy investments.

"Whether it was three years or nine years, the damage to investor confidence has been done already," said Stephen O'Sullivan, head of research at Moscow-based United Financial Group. Analysts say that in the light of recent events, companies investing in Russia must accept a certain amount of political and legal risk.

Yet with oil majors struggling to replace reserves with big new discoveries, oil companies are unlikely to be deterred from investing in the country, given its huge upstream potential.

According to one influential energy-industry figure, involvement in the large-scale, long-term energy developments the country has to offer is "more important than a political debate between the government and an oligarch". He added that bringing the Khodorkovsky affair to an end will help investors refocus on industry matters. "It's better to have a horrible end than to have endless horror."

There is little evidence to suggest that companies are turning their back on Russia. ConocoPhillips paid $1.988 billion for a 7.59% stake in Russia's Lukoil, BP continues to invest heavily in TNK-BP, and Shell operates the Sakhalin Island LNG development.

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