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Posted on 12/19/2004 8:00:43 PM PST by crushelits
MOSCOW, Russia dismantled its largest oil producer, Yukos, on Sunday by auctioning off the company's largest subsidiary to a little-known concern that registered as a last-minute bidder on Friday.
Gazprom, the country's natural gas monopoly and the Kremlin-favored front-runner to buy the Yukos property, did not even make a bid.
The mystery surrounding the winner - a company called the Baikal Finans Group that is registered in Tver, a medium-size city 170 miles northwest of Moscow - immediately raised suspicion among industry analysts.
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An analyst, Christopher Weafer, the equity strategist at Alfa Bank, remarked after the auction results that "the surprise winning bidder in today's auction, Baikal Finans Group, is either a front for Gazprom or a state-friendly company," or, he added, "a combination of state and state-friendly interests."
But officials of Gazprom insisted that their company had no connection to the successful bidder.
What unfolded on Sunday appeared to be a direct result of a surprise ruling in the United States Bankruptcy Court in Houston last week. A bankruptcy judge issued an injunction on Thursday against all bidders and lenders in the auction. That caused Deutsche Bank and others in a lending syndicate to withdraw from financing Gazprom's bid to buy the oil fields and production sites of the Yukos unit, Yuganskneftegas. The huge subsidiary pumps as much oil a day as all of Indonesia.
On Friday, Russian officials denounced the American court's ruling and said that it had no legal bearing. But it clearly had an effect. Gazprom appealed the ruling on Saturday, but the appeal was denied. Gazprom's bidding vehicle, Gazpromneft, which was named in the Houston court ruling, stayed on the sidelines on Sunday.
The Yukos unit was being sold to help cover more than $27 billion in tax claims that the Russian government has lodged against Yukos, formerly the country's No. 1 private oil producer, over the last year. The action is part of a broader campaign against the company and its founder, Mikhail B. Khodorkovsky.
The auction on Sunday seemed reminiscent of Russian privatization deals in the early 1990's - with murky financing, questionable bidders and unknown companies representing powerful financial groups emerging to win lucrative assets. Many of Russia's current generation of new oligarchs became billionaires in those deals overnight.
"This bid by Baikal Finans Group was a smoke screen and a delay tactic," said James Fenkner, head of research at the brokerage firm Troika Dialog - possibly, he said, to allow Gazprom more time to raise funds. "Why can't there be a transparent auction run by the state? The whole thing just makes Russia look bad."
The Baikal Finans Group, which listed its address as the same as that of a cellphone store in Tver, won a controlling stake, or 76.79 percent of the shares, in Yuganskneftegas with a bid equivalent to about $9.35 billion. That was above the starting price of $8.65 billion, but still far below what is considered he fair market value of the unit, according to independent banks hired separately by Yukos and the Russian government.
It is possible that another Russian oil company with lots of cash, like Surgutneftegas, was the real bidder, but analysts said it was more likely that all this was a way to give Gazprom time to come up with new financing.
The Russian government's prosecutorial assault on Yukos and its founder, which began in summer 2003, has set foreign investors on edge and raised questions about the rule of law, property rights and President Vladimir V. Putin's commitment to economic change. And Sunday's blow to Yukos, which had already sought bankruptcy protection in Houston last week, seemed part of that pattern.
The bidding process for Yuganskneftegas was a bizarre, confused affair: reporters were invited to watch the afternoon auction at the Russian Federal Property Fund's offices, but only on big-screen television sets. The property fund did not provide any information about the bidders.
Officials of Gazpromneft and the Baikal Finans Group sat side by side at separate tables in a plain, brown and beige room. Baikal made an opening bid, and then a Gazpromneft official left the room briefly to take a phone call. He returned a few minutes later, but Gazpromneft never submitted a bid.
The Baikal Finans Group's representative again raised his paddle, winning with a bid of 260.753 billion rubles, or almost $9.35 billion. From time to time, he conferred with a colleague sitting next to him. After just 10 minutes of bidding, the Russian Federal Property Fund, which organized the sale, announced Baikal Finans Group as the winner.
"The shares have been sold," said Valery Suvorov, a deep-voiced auctioneer dressed in bowtie and tails and wielding a gavel.
Wait until Baikal's **real** principals are revealed -- gonna have a big ol' ''DUH-H-H!''
Russian maffia style.
And this lot are some serious fixers, esp. when operating with at minimum the tacit approval of ol' Poot.
Remember, Russia has NO -- say again ZERO -- definition of property at law. The rules are whatever they can get away with.
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