THE NEW YORK TIMES: The Strange Yukos Sale: “Nobody argues that Yukos, a product of the piratical privatizations of the early 1990's, is an innocent victim. Russia certainly can choose to nationalize the industry. But reversing a piratical privatization through a piratical nationalization only confirms that doing business in Russia remains highly risky.” (ShellNews.net) 25 Dec 04
Published: December 25, 2004
The White House deserves kudos for protesting Russian President Vladimir Putin's sale of the main production unit of the oil giant Yukos to a company that no one had ever heard of before. Sure, the rebuke came a full day after President Bush passed up a chance to publicly criticize his good friend, Mr. Putin, for the Kremlin's clumsy efforts to smother Yukos and other private enterprises in Russia, but at least it happened.
The tale is just about as sorry a story as business enterprise can get in Russia, and it keeps getting weirder. Mr. Putin, bent on destroying Yukos and its jailed founder, Mikhail Khodorkovsky, was preparing for what was to be the final swing of his dull ax, the "auction" of Yukos's most critical asset to Gazprom, the Russian state energy behemoth. But Yukos's remaining managers, now wisely living abroad, hit on the idea of filing for bankruptcy protection in Houston.
More amazing, the judge there issued an injunction against the auction. Russian authorities predictably jeered the ruling and declared that they were going ahead with the sale of the subsidiary, known by the catchy name Yuganskneftegaz.
Still, the ruling by Judge Letitia Clark had an immediate impact: Western banks, which had put together a multibillion-dollar loan for the sale, balked at defying an American court. When the auction opened last Sunday, the Gazprom representative suddenly had to leave to answer his cellphone. When he came back, the only bidder left was a shell company named Baikal Finans Group, which lists the address of a cellphone store 170 miles from Moscow.
Baikal picked up Yuganskneftegaz for only $500 million more than the starting price of $8.87 billion, which was already obscenely low for a company that pumps 11 percent of Russia's oil.
It hardly came as a surprise when Baikal was swiftly bought by Rosneft, a state-owned Russian oil company. From the jailing of Mr. Khodorkovsky in October 2003, through a progression of ever more ridiculous tax bills and made-for-TV searches, Mr. Putin has left little doubt that the goal is to get the Russian oil industry back into the hands of the state.
Nobody argues that Yukos, a product of the piratical privatizations of the early 1990's, is an innocent victim. Russia certainly can choose to nationalize the industry. But reversing a piratical privatization through a piratical nationalization only confirms that doing business in Russia remains highly risky.