UPDATE 2-Kazakh tycoon sought by Russia, Ukraine to stay in French jail
* Court says should not be free for his own safety -lawyer
* Ukraine and Russia both demand his extradition
* Tycoon says charges against him politically motivated
* BTA says Ablyazov cannot be trusted to respect law
By Jean-Francois Rosnoblet
MARSEILLE, France, Aug 22 (Reuters) - Kazakh oligarch Mukhtar Ablyazov, accused of embezzling up to $6 billion from his former bank, was denied release on bail from a French jail on Thursday while he awaits a decision on whether he will be extradited.
The 50-year-old has been in custody at the Aix-Luynes jail in southern France since he was arrested near the Riviera resort of Cannes in July after 18 months as a fugitive.
Russia, Ukraine and Kazakhstan brought fraud charges against him after BTA, the Kazakh bank he once controlled, was seized by Kazakh authorities and declared insolvent in 2009. Ukraine and Russia have both demanded his extradition.
BTA, which has Russian and Ukrainian subsidiaries, later brought a $6 billion fraud case against him in Britain.
Ablyazov, who denies the fraud charges which he says are designed by strongman Kazakh President Nursultan Nazarbayev to silence him as a political rival, went on the run after being handed a jail sentence for contempt of court by a British judge.
An appeals court in the French city of Aix-en-Provence decided on Thursday that the former banker should not be freed for his own safety, his lawyer Bruno Rebstock told Reuters.
"Threats against Ablyazov and the consideration that he's safer inside prison than out motivated the court's decision to reject his (bail) request," Rebstock said.
A hearing expected in September will examine whether France will extradite Ablyazov to Ukraine or Russia.
Ablyazov, a former Kazakh government minister, fled Kazakhstan in 2009 after BTA was seized. He was granted political asylum in Britain in 2011, giving BTA the jurisdiction to bring a civil claim against him on British soil.
He has said his life has been in danger since he left Kazakhstan and that he feared for his safety in a British jail.
Any extradition process from France would take several months, legal sources say, as Russia and Ukraine would have to compile and send to French authorities the necessary proof justifying the charges filed against him.
Ablyazov cannot be extradited to Kazakhstan because it is not a member of the Council of Europe extradition convention, but his family has said it fears that Ukraine plans to subsequently transfer him there.
An English High Court judge in March effectively declared Ablyazov guilty of committing one of the largest frauds ever tried in Britain - although his lawyers said later that judgment was based on "unproven assumptions".
His lawyers were also barred from making oral submissions to court because, a judge said, he had ignored court orders to turn himself in and fully declare his assets.
BTA said in a statement on Thursday that it welcomed the French court's decision to deny Ablyazov's bail request.
"He is already a fugitive from Kazakhstan and the UK and has consistently demonstrated that he cannot be trusted to respect any laws which would hold him to account for his fraud," said BTA's managing director, Pavel Prosyankin.
"We expect that his attempts to deflect attention from his criminal activity will fail in France, as it did in the UK."
In May, Ablyazov's wife and six-year-old daughter were deported from Rome to Kazakhstan in a case that caused a furore in Italian politics and prompted calls for the resignation of Italy's interior minister.
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