December 23, 2004

Yukos Saga

The nationalisation of Yuganskneftegas, an arm of the Russian oil giant Yukos, is well underway. Yuganskneftegas was recently bought at a two party, one bidder auction for $9.35bn by the hitherto unknown Baikal Finance Group which was subsequently taken over by Rosneft, a state owned energy company. Observers had expected the bid to be won by another state owned company called Gazprom despite a last minute US ruling which claimed a bid by the company would be illegal. The merger of Gazprom and Rosneft is now underway, a move that will create a monolithic state owned monopoly reminiscent of the period before the country's bodged privatizations.

From the Financial Times:
"Rosneft, which made the announcement through the Interfax news agency, said its acquisition was part of a plan to turn the company into a “balanced, national energy corporation”. This acquisition also appears to be part of Russia’s move towards greater state control over the commanding heights of the economy, particularly in the energy sector."

Does this all sound just a little too convenient? Not so according to Vladimir Putin who at a recent press conference said, "Everything was done by market methods."

Yup. Obviously. The whole saga has been driven by the greed and fear of the current government as well as by accusations of fraudulent activity and tax evasion; activities hardly rare in Russia. As a result of such claims, former head of Yukos, Mikhail Khodorkovsky, is currently being detained by the authorities. Coincidentally, Mr Khodokovsky was and active on the political scene and made use of his wealth by contributing to the accounts of rival parties. The acquisition of Yuganskneftegas and eventual disintegration of Yukos eliminates a potent political threat and provides the government with substantial funds. A select few stand to make substantial gains from the process at the expense of Russian citizens and the Russian economy.

This fiasco sends a clear message to foreign firms operating in the region or those engaging in any other form of investment. The Russian government has no qualms about appropriating assets of even the most powerful of companies for the most tenuous of reasons.

- One comment Not publicly viewable

  1. It's amazing. It was only in 1998 that the Russian economy collapsed completely. The stock market lost 90% of its value. The Congressional report (2000) on that melt-down is still relevant. Is Putin ready to risk it all again?

    23 Dec 2004, 16:50

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