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Yukos under the hammer as state controls energy
Updated: 2004-12-19 09:42

Devastated Russian oil giant Yukos's main asset goes under the hammer on Sunday in an auction expected to be won by state gas behemoth Gazprom, creating a government-controlled energy monolith reminiscent of Soviet times.

Fourteen months since politically-ambitious billionaire Yukos founder Mikhail Khodorkovsky was arrested at gunpoint in his corporate jet at a Siberian airfield, flown to Moscow and put in jail, his company lies in ruins.

Defying an 11th-hour US legal order barring the sale and Gazprom's bid, the Russian government at 4:00 pm (1300 GMT) on Sunday will hold an auction for Yukos's crown jewel Siberian oil-pumping subsidiary, Yuganskneftegaz.

"The company has debts towards Russia and Russia has the right to take everything it is owed," the head of the Federal Energy Agency, Sergei Oganesyan, told the official Rossiskaya Gazeta daily's Saturday edition.

Yukos, the top Russian oil producer, has been slapped with gargantuan tax bills of 27.5 billion dollars (20.7 billion euros) -- equivalent to the company's entire oil sales for 2002 and the first nine months of 2003.

To pay off the tax claims, which Yukos says are fraudulent, 76.79 percent of Yugansk is being auctioned off for a starting price of 8.65 billion dollars -- half what the company is worth according to independent valuations.

Yugansk pumps 60 percent of Yukos' oil and accounts for more than 70 percent of its proven reserves.

The unprecedented destruction of Russia's major private company to forge a state energy giant is seen in Moscow as the brainchild of the Kremlin, where a powerful group of former KGB officers hold sway in President Vladimir Putin's court.

With geopolitical rivalry growing between the West and Russia, shown by the bitter row over disputed presidential elections in Ukraine, regaining control of vital oil resources that were privatized in the 1990s has become a national security priority, analysts say.

"By doing so, the state will have restored its previous control over a big piece of an industry that is not only the most important element in the local economy, but along with natural gas, is increasingly the modern equivalent of military might," Christopher Weafer, chief strategist at Alfa Bank, said in a comment piece.

Gazprom, the world's largest gas producer, is already merging with state-owned oil firm Rosneft. Buying Yugansk, which produces a million barrels of oil a day -- the same as the US state of Texas -- will transform it into the biggest global energy concern.

Yukos' successful legal action in the United States, where a court in Houston, Texas on Thursday granted it bankruptcy protection and barred the auction for 10 days, did not block the sale but caused financing problems for Gazprom.

Fearful of US legal consequences, a consortium of Western banks due to lend Gazprom 10 billion euros (13 billion dollars) for the bid, suspended agreement on the credit.

This has forced Gazprom at the last minute to look for alternative sources of finance, which analysts say could be provided by a cash-rich partner and/or Russian state banks with the help of government funds.

The Houston court order also raises the spectre of lengthy and damaging US legal pursuits against Gazprom that Russian officials say could mirror the campaign waged by Swiss firm Noga to seize Russian assets abroad over a debt dispute.

"Everyone knows what problems foreign courts can cause for Russian companies. Yukos has secured itself the same possibilities (as Noga) after the Texas court ruling. Gazprom should take the situation very seriously," a high-ranking member of the government told Rossiskaya Gazeta on condition of anonymity.

But barring an unexpected hitch, the auction is to go ahead, with Gazprom oil subsidiary Gazpromneft on Friday having paid its deposit of 1.77 billion dollars to participate.

"Everything is ready for it to be held," Alexander Komarov, spokesman for the Russian Federal Property Fund which is staging the auction, said Saturday.

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