THE NEW YORK TIMES: Russia Accused of Theft as YUKOS Oil Auction Set: “Oil majors, such as BP and Shell, are actively investing in Russia, one of the last places in the world where major oil reserves are still up for grabs. But investors doubted oil majors would bid for Yugansk. ``The idea that a foreign company will buy Yugansk is a joke,'' said Martin Taylor, hedge fund manager at London-based Thames River Capital, which manages $5.5 billion of assets. Officials and sources at firms, such as BP, Shell, Total, ChevronTexaco and LUKOIL, said they were very unlikely to bid. But one senior Western investment banking source said he did not exclude a joint bid by a Russian and a foreign company.” (ShellNews.net) Posted 20 Nov 04
MOSCOW (Reuters) - Russia pressed ahead on Friday with the last step in the destruction of YUKOS, saying it will auction the oil major's main Siberian unit on Dec. 19 for $8.65 billion and hit it with a new tax claim.
YUKOS denounced the sale of Yuganskneftegaz as state-sponsored theft, designed to strip its main owner Mikhail Khodorkovsky -- on trial for tax evasion and fraud and facing up to 10 years in prison -- of his main asset.
The sale would mark a climax in a 16-month-old battle between the Kremlin and the politically ambitious tycoon which has damaged investor conference in Russia and helped push world oil prices to historic highs.
``YUKOS as we know it can never look the same again,'' said Adam Landes from Renaissance Capital. ``We have reached a point of no return for the company and the Kremlin.''
President Vladimir Putin's economic adviser Andrei Illarionov told Reuters that ``if the sale goes ahead, it can only be described in two words: 'daylight robbery'.''
Illarionov, who is known for outbursts and once described the Kyoto environmental treaty as ``economic Auschwitz'' for Russia, said the sale was unnecessary as YUKOS was paying its tax bills.
Analysts said the price, at the low end of an independent valuation but above the most pessimistic expectations, would still allow the state to sell more YUKOS assets later to recover its tax debts, which were jacked up to $24.5 billion on Friday.
They tipped gas monopoly Gazprom as front-runner to buy the unit, while bankers and Western executives said foreigners, although allowed to bid, were likely to be deterred by the legal and tax risks that a Yugansk purchase would entail.
YUKOS produces a fifth of Russian oil or 1.7 million barrels per day and Yugansk is responsible for 60 percent of its output.
``The starting price bears no resemblance to the true value of Yugansk, one of the world's premier oil producing firms, and amounts to theft of YUKOS assets,'' said YUKOS CEO Steven Theede.
``What we are witnessing is, simply put, a government organized theft to settle a political score.''
The state will sell all Yugansk voting shares or 76.79 percent of its capital.
NO FOREIGN BIDS EXPECTED
YUKOS shares closed 29 percent down at 60.7 roubles, their lowest since early 2001, on news of the planned sale and a new tax claim of $6 billion for 2003 in addition to existing demands of $18.5 billion for preceding years.
Once Russia's largest firm by market capitalization, worth over $40 billion, YUKOS is now worth just $5 billion. Renaissance Capital withdrew its ``buy'' rating on YUKOS, saying the stock had now joined the distress investor class.
Shares of other Russian oil and metals firms like Sibneft and Norilsk, snapped up by ``oligarchs'' Roman Abramovich and Vladimir Potanin in 1990s privatizations, also slumped on fears of YUKOS-style probes.
Oil majors, such as BP and Shell, are actively investing in Russia, one of the last places in the world where major oil reserves are still up for grabs.
But investors doubted oil majors would bid for Yugansk. ``The idea that a foreign company will buy Yugansk is a joke,'' said Martin Taylor, hedge fund manager at London-based Thames River Capital, which manages $5.5 billion of assets.
Officials and sources at firms, such as BP, Shell, Total, ChevronTexaco and LUKOIL, said they were very unlikely to bid.
But one senior Western investment banking source said he did not exclude a joint bid by a Russian and a foreign company.
``Someone will show up,'' he said. Italian media have reported Eni could bid for Yugansk, but the energy group denied it had presented an offer. U.S. ExxonMobil was not available for comment.
GAZPROM OR NO BIDS
The auction starting price is below a low-end valuation of $10.4 billion by investment bank Dresdner Kleinwort Wasserstein on behalf of the government. The bank recommended a selling price for Yugansk of $14-$17 billion.
``We still believe that a Russian company will be a front-runner at the auction, most likely Gazprom, and that more assets could be sold afterwards,'' said Valery Nesterov from Troika Dialog brokerage.
State-controlled Gazprom, which previously said it was not interested in Yugansk, gave a non-committal comment on Friday. ``The issue of participating in the auction is not a subject of discussions for Gazprom,'' spokesman Sergei Kupriyanov said.
Russia's No.4 oil firm Surgut, also tipped as a potential bidder, declined to comment.
``I think there will be no bids,'' said Vadim Mitroshin from CSFB. ``No company in the world would bid for a unit whose tax debt is still unclear. Then there could be another auction with a lower starting price.''
YUKOS's other key assets include two producing units in Siberia and the Volga region as well as five refineries in Russia and one in Lithuania.
The auction will come one day before a YUKOS shareholders meeting to consider bankruptcy or liquidation on Dec. 20.
Khodorkovsky said in a statement on Friday he and his allies were now transferring shares to YUKOS management but did not elaborate. (To read the statement, click on or).
Bidders must place a huge returnable deposit of $1.73 billion in a move seen to prevent the current owners bidding up the price without intending to buy.
``Nobody is going to put down 1.7 billion dollars of deposit unless they get sovereign guarantees. And nobody is going to bid for Yugansk unless they get a Kremlin agreement that they are not going to hit Yugansk with further taxes,'' said Thames River Capital's Taylor.