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To: Terry Maloney who wrote (299649)	12/23/2004 12:10:28 PM
From: maceng2	Read Replies (1) \| Respond to of 436258

That Russian Oil thing seems to be really heating up.. State steps in for Yukos unit guardian.co.uk washingtontimes.com -------------------------------------------------------------- Catherine Belton in Moscow Thursday December 23, 2004 The Guardian Russia's state owned oil firm Rosneft has bought the mystery winner of Yukos' prize production unit in a move that nationalises 11% of the country's oil output even as a legal battle rages in America over the sale. A Rosneft official told news agencies yesterday his firm had bought 100% of Baikal Finance Group, the surprise winner of the oil unit Yuganksneftegaz in a controversial government auction on Sunday. "The owners of Baikal Finance made us an offer to sell their company, and we took it," said Rosneft spokesman Alexander Stepanenko. He would not disclose the sum involved. The move ends days of speculation over one of the most bizarre and controversial sell-offs in Russian history, which saw Yugansk, the producer of some 1% of global crude output, bought for $9.4bn (£4.9bn) by Baikal, a mystery shell company registered at the same address as a grocery store in the provincial Russian town of Tver. Till now, no Russian official, including President Vladimir Putin, has said exactly who owns it. The government sold Yugansk as payment for more than $27bn in back taxes levied against Yukos in an auction that marked the culmination of an 18-month legal onslaught against the company and its jailed founder Mikhail Khodorkovsky. The campaign has been seen as Kremlin payback for Khodorkovsky's attempts to undermine President Vladimir Putin's hold on power. Yesterday's announcement sees the heart of Khodorkovsky's Yukos oil empire back in the hands of the state even as Yukos lawyers fight an unprecedented legal battle in a Houston courtroom over the Russian government's right to conduct the sale. In hearings in Houston yesterday, Yukos claimed that state-controlled gas giant Gazprom had illegally taken part in Sunday's auction in contempt of an earlier ruling last week to temporarily stay the sale. Representatives of Gazprom had participated in the sale, but had backed off from bidding due to fears over possible legal repercussions, allowing Baikal to move in and win. Analysts believe Baikal was a hastily arranged shell firm set up to hold Yugansk while the Kremlin weighed the legal risks of acquiring Yugansk. If the US court rules that Gazprom took part in the sale or assisted Baikal in the acquisition of Yugansk in contempt of the ruling, Gazprom's gas and oil shipments could be seized as soon as they leave Russian territory, a potential nightmare for the Russian government. The White House has slammed the sale of Yugansk. Spokesman Scott McClellan said: "We are disappointed that Russia went ahead with the auction of the Yukos subsidiary." ------------------------------------------------------------- Bush to express concerns to Putin Washington, DC, Dec. 21 (UPI) -- U.S. President George Bush may express concern with Russia's controversial sale of an oil company subsidiary when he meets President Vladimir Putin next year. OAO Yuganskneftegaz, the main production unit of the Yukos Oil Co., was auctioned Monday for $9.3 billion to a small financial group to help its parent pay more than $27 billion in back taxes. White House spokesman Scott McClellan indicated Bush would likely bring the matter up Feb. 24 when he meets Putin in the Slovak Republic during a European trip. "We are disappointed that Russia went ahead with the auction," spokesman McClellan added. "We had hoped for a solution that would allow for the legitimate enforcement of tax law, but avoid harming investors, especially American investors." The United States, he added, believes Russia has the obligation to protect property rights and the rule of law to build confidence in the country. Putin is attempting to break up politically powerful business oligarchs that arose after the collapse of the Soviet Union. Yuko's founder, one of Putin's political enemies, is in jail awaiting trial on charges of tax evasion and fraud.