THE NEW YORK TIMES: Kremlin Reasserts Hold on Russia's Oil and Gas: “Sergei Bogdanchikov, who would lead Gazprom's oil and gas business, said Gazprom wanted to compete with giants like Exxon Mobil, Royal Dutch/Shell and BP.”: “For American consumers and investors, the obituary of Yukos would be a symbol of what Russia can do to companies that have come into such riches that even the Kremlin is envious.” (ShellNews.net) 17 Dec 04
By ERIN E. ARVEDLUND and SIMON ROMERO
Published: December 17, 2004
MOSCOW, Dec. 16 - On Sunday, Russia plans to auction the jewel of what used to be its most profitable, high-profile and well-run private company: the oil giant Yukos. And if the auction takes place, the winner most likely will be a financially opaque, government-run natural gas behemoth, Gazprom.
Practically overnight, Russia and its president, Vladimir V. Putin, would create an energy company that not only controls about 20 percent of the nation's oil exports but also has some of the world's largest energy reserves.
A Kremlin campaign that unfolded over the last year will have succeeded in dismembering the country's foremost private oil company, and it will send a signal to Russia's business elite that the state is back in business, literally.
Yukos was created under questionable circumstances from the remains of state oil assets in the early and mid-1990's. On its face, the Russian government is trying to sell Yukos's largest production subsidiary, Yuganskneftegas, to pay back a tax claim of more than $27 billion. But the startlingly low opening bid of $8.65 billion, which the government set, was expected to tip the scales toward a state-friendly bidder like Gazprom.
A ruling late Thursday in a federal bankruptcy court in Houston, however, raised some questions about the participation in the auction of banks that were expected to finance the deal. A federal bankruptcy judge in Houston, Letitia Z. Clark, issued a temporary restraining order intended to block the participation of lenders and Gazprom. The banks, analysts said, have extensive operations in the United States and might be concerned about ignoring the restraining order, which could put them in contempt of court.
But Judge Clark's ruling did not apply to the government of Russia, and analysts said they expected the Russian authorities would go ahead with the auction on Sunday regardless of the ruling.
The management of Yukos, in a statement late Thursday, said that while they were heartened by the ruling and would continue their fight in the American courts, they remained realistic about its immediate effect.
Although two other largely unknown companies have submitted bids for Yukos in the auction, their presence was seen as purely an effort to make the auction seem valid. Foreign investors, including companies from China, India and other overseas energy investors, have been discouraged from participating.
If the auction is completed on Sunday, Yukos will essentially die that day - a casualty of efforts by Russian prosecutors that came with the tacit blessing of Mr. Putin. The founder of Yukos is now being held in jail, the company's American executives are in self-imposed exile and its shareholders are out billions of dollars. Russia's actions have set foreign and domestic investors on edge, prompted capital flight and raising questions about the rule of law and how businesses will fare.
Whether the Kremlin initially intended to dismantle Yukos, or merely to make an example of it to private business, is unclear, but a result, said Fiona Hill, senior fellow at the Brookings Institution in Washington, is "not outright nationalization, but creeping nationalization."
Mr. Putin had made no secret of the fact that he views Russia's oil and gas, diamonds and precious metals as strategic natural resources - weapons in his nation's fight to regain its global economic status.
For Mr. Putin, oil may also be more than just a strategic asset. It is a symbol of power and a resource that helped support the Soviet government, especially during troubled economic times. Thanks to oil exports, the Soviet Union managed to maintain the illusion of economic health even during years of stagnation in the 1970's and 1980's.
It is also Mr. Putin's best hope of restoring Russian ambitions and presenting a facade of security.
Only months ago, Yukos was the darling of Western investors and it was poised to become an international oil giant with influence far beyond Russia's borders.
Gazprom is the largest natural gas company in the world, with a quarter of all gas reserves. By adding Yukos's oil assets, it will become one of the largest energy companies in the world by reserves.
"The Kremlin wants to set the strategic economic agenda, and that means not leaving the long-term strategies and decisions about how revenues should be spent to private companies," Ms. Hill said. "The state wants control of the commanding heights. This is how Russia positions itself as a superpower."
With a bulked-up Gazprom, Mr. Putin will take a leaf out of the book from China, Japan and South Korea, where governments worked hand-in-hand to champion certain industries and build successful corporate leaders. Mr. Putin was probably paying close attention when China's high-technology giant, the Lenovo Group, bought the personal computer business of I.B.M. this month.
The Kremlin hopes to create huge world-class corporations in important sectors - what Vladimir Konovalov, a member of the Petroleum Advisory Forum, a lobbying group, has called "ship of state" companies.
Sergei Bogdanchikov, who would lead Gazprom's oil and gas business, said Gazprom wanted to compete with giants like Exxon Mobil, Royal Dutch/Shell and BP.
Ms. Hill said it was even possible that Gazprom might someday buy oil assets outside of Russia.
For American consumers and investors, the obituary of Yukos would be a symbol of what Russia can do to companies that have come into such riches that even the Kremlin is envious.