Russia Privatizing Runs Into Trouble
MOSCOW (AP) -- The largest planned privatization in Russia's history ran
into more trouble Friday when Royal Dutch-Shell said it was no longer
interested in buying the state-controlled oil company, NK Rosneft.
Analysts say the cash-strapped Russian government has few other likely
bidders for 75 percent of Rosneft, the country's fifth-largest oil
company, and may have to further slash the asking price or cancel the
sale.
The government already canceled one attempt to sell Rosneft this spring,
when bidders said the $2.1 billion asking price was too high. It lowered
the price to $1.6 billion in early June, but the Russian stock market
has fallen 25 percent since then.
''It is enough to give anyone second thoughts about whether they should
participate in this,'' said Per Mellstrom, head of research at Brunswick
Warburg brokerage in Moscow. ''I think the consequences of this may be
that the price will have to be cut further.''
Shell had been expected to bid for Rosneft with two Russian companies --
natural gas monopoly RAO Gazprom and oil giant AO Lukoil. The government
opened bidding last week, and planned to close it July 16.
Neither Gazprom nor Lukoil appear to have the cash to proceed on its
own. Gazprom chief executive Rem Vyakhirev said last month that his
company's participation depended on Shell's actions.
Shell blamed the depressed outlook for oil prices, which it said ''does
not justify a bid under current conditions.'' Shell also cited the
present difficult financial circumstances in Russia, which it said would
require Shell to finance a major part of the bid.
A consortium led by British Petroleum Co (NYSE:BP - news). PLC had
earlier indicated interest in bidding for Rosneft in conjunction with
Sidanco, Russia's fourth-largest oil producer. BP refused to comment on
its plans Friday.
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