Something is rotten in Moscow. This looks like a front company for Putin's buddies. I think Putin is trying to go back to the USSR.
A Surprise Bidder Buys Yukos Unit
Analysts Question Role of the Kremlin
By Peter Finn
Washington Post Foreign Service
Monday, December 20, 2004; Page A17
MOSCOW, Dec. 19 -- A mysterious investment group formed just last month bought a majority stake in the core production unit of the Russian oil giant Yukos Oil Co. for $9.3 billion Sunday at a Moscow auction where the state-controlled Gazprom company showed up but then defied expectations and did not bid.
By standing down at the very last moment, Gazprom appeared to bow to a U.S. court's temporary injunction last week barring it from participating in the sale, which went ahead in defiance of the court decision.
The winning company, BaikalFinansGroup, with an address in the small city of Tver, 125 miles northwest of Moscow, filed to participate in the auction Thursday and made a $1.7 billion non-refundable deposit. This came immediately after a federal judge in Houston ruled in favor of a Yukos request to stop the auction and restrain Gazprom from taking part. The court also barred a consortium of Western banks from going ahead with plans to lend Gazprom money for its bid.
After the ruling, the banks, including Deutsche Bank AG, ABN AMRO, BNP Paribas, and Dresdner Kleinwort Wasserstein, froze between $10 billion and $13 billion they had planned to lend Gazprom. The court decision was upheld by a second judge after Gazprom appealed.
The forced sale of 76 percent of the Yuganskneftegaz unit, which pumps nearly 1 million barrels a day and accounts for nearly 60 percent of Yukos's production, was ordered by the government to recoup some of the $28 billion in back taxes that the Russian government has assessed against Yukos.
Yukos argued in court papers in Houston that the state's prosecution was arbitrary retaliation for the political activities of its founder and former chief executive, Mikhail Khodorkovsky, and had no basis in law. Khodorkovsky is on trial on charges of fraud and tax evasion, and faces up to 10 years in prison if convicted.
Gazprom told the Interfax news agency that it had no hidden business relationship with the successful bidder. And speculation immediately focused on another cash-rich but secretive Russian oil company, Surgutneftegaz, either as the new owner, or the financer of the bid by an unknown group. The company accounts for about 13 percent of Russian oil production and is believed to have close ties to the Kremlin. In October, it said it was considering bidding.
The ITAR-Tass news agency reported that one of its correspondents visited the address the Baikal group gave the Federal Property Fund, which conducted Sunday's auction, and found a mobile phone shop and a grocery store. A security guard at the site told the agency that he knew of no such tenant.
The address Baikal gave is on the same street as a company in Tver called Tvernefteproduct, which is a subsidiary of Surgutneftegaz, according to the company's Web site.
Surgutneftegaz, however, denied any involvement.
Analysts said that the hidden hand behind the Baikal group was certainly known to the Kremlin.
"One thing I'm confident of is that this deal was completely organized by the Kremlin and everything that is happening is on direct instruction from the Kremlin," Vladimir Milov, a former deputy energy minister and now the president of the independent Institute of Energy Policy in Moscow, said in a telephone interview. "I exclude any surprise development not authorized by the Kremlin."
A spokesman for Yukos, threatening further legal action, said that the sale was illegal and the Baikal group "has bought itself a headache."
"Whoever stands behind the winner and gave it financial help have done irreparable damage to their reputation and subjected their business to significant legal risks," said spokesman Alexander Shadrin.
The Federal Property Fund could also shed no light on the Baikal group, whose name comes from a deep freshwater lake in Siberia.
"We know nothing about this company and for us it was as much of a surprise as to all of you," the fund's acting chairman, Yuri Petrov, said at a post-auction news conference. Asked where the group came up with its $1.7 billion deposit, Petrov said "it's not within our authority to check their finances."
Petrov also said that if Baikal failed to pay the balance of its $9.3 billion bid within 14 days "they will lose their down payment and the auction will be considered invalid." In that case, said Alexander Buksman, a Justice Ministry official, the auctioned shares in Yuganskneftegaz would be transferred to the state.
The auction itself was as strange, if not surreal, as the unlikely outcome. Through closed-circuit television, reporters watched a five-member commission from the federal agency call the auction to order in a small wood-paneled room. Only two of four expected bidders showed up, Gazprom and Baikal. Each had two representatives sitting behind desks facing the commission.
For the next 20 minutes the two groups went back and forth to a secretary's desk where they picked up green and yellow badges and lollipop sticks for the auction itself. Then an auctioneer, wearing a tuxedo and a red bow tie, came in and stood behind a lectern to the side of the commission.
Before the bidding started, the chairman announced a series of rules barring the bidders from using "communication devices" and leaving the room. He also asked the auctioneer if he could see the green and yellow badges even though the bidders were sitting just feet away from him.
The auctioneer asked the Baikal group if it would meet the minimum bid of $8.8 billion. The group's representative held up its lollipop stick and whispered a bid of $9.3 billion, which the auctioneer apparently didn't hear, thinking the group had bid $8.8 billion. The Gazprom representative then asked if he could leave the room to make a phone call, in violation of the rules that had just been announced.
When he returned, the Baikal group then confirmed its bid and the Gazprom representatives remained silent as the auctioneer banged the lectern three times with a wooden gavel.
Despite the sale, Yukos, once valued at $40 billion and regarded as a model company in Russia's frontier-style capitalism, still owes enormous tax debts and will likely be eviscerated if the state presses forward with the seizure of further assets to cover back taxes.
© 2004 The Washington Post Company |
