RUSSIA: State Steps in for Yukos Unit

Publisher Name: 
The Guardian

Catherine Belton in Moscow
Thursday December 23, 2004
The Guardian

state owned oil firm Rosneft has bought the mystery winner of Yukos'
prize production unit in a move that nationalises 11% of the country's
oil output even as a legal battle rages in America over the sale.

Rosneft official told news agencies yesterday his firm had bought 100%
of Baikal Finance Group, the surprise winner of the oil unit
Yuganksneftegaz in a controversial government auction on Sunday.

owners of Baikal Finance made us an offer to sell their company, and we
took it," said Rosneft spokesman Alexander Stepanenko. He would not
disclose the sum involved.

move ends days of speculation over one of the most bizarre and
controversial sell-offs in Russian history, which saw Yugansk, the
producer of some 1% of global crude output, bought for $9.4bn (£4.9bn)
by Baikal, a mystery shell company registered at the same address as a
grocery store in the provincial Russian town of Tver. Till now, no
Russian official, including President Vladimir Putin, has said exactly
who owns it.

government sold Yugansk as payment for more than $27bn in back taxes
levied against Yukos in an auction that marked the culmination of an
18-month legal onslaught against the company and its jailed founder
Mikhail Khodorkovsky. The campaign has been seen as Kremlin payback for
Khodorkovsky's attempts to undermine President Vladimir Putin's hold on

announcement sees the heart of Khodorkovsky's Yukos oil empire back in
the hands of the state even as Yukos lawyers fight an unprecedented
legal battle in a Houston courtroom over the Russian government's right
to conduct the sale.

In hearings in Houston
yesterday, Yukos claimed that state-controlled gas giant Gazprom had
illegally taken part in Sunday's auction in contempt of an earlier
ruling last week to temporarily stay the sale. Representatives of
Gazprom had participated in the sale, but had backed off from bidding
due to fears over possible legal repercussions, allowing Baikal to move
in and win.

believe Baikal was a hastily arranged shell firm set up to hold Yugansk
while the Kremlin weighed the legal risks of acquiring Yugansk.

the US court rules that Gazprom took part in the sale or assisted
Baikal in the acquisition of Yugansk in contempt of the ruling,
Gazprom's gas and oil shipments could be seized as soon as they leave
Russian territory, a potential nightmare for the Russian government.

White House has slammed the sale of Yugansk. Spokesman Scott McClellan
said: "We are disappointed that Russia went ahead with the auction of
the Yukos subsidiary."

AMP Section Name:Energy