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13.08.07
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Russneft: Torn By Two Kremlin Groups?
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By Dmitry Babich
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Extracting value from Russneft
The situation around the oil company Russneft is becoming tenser as the Russian Federal Service on Financial Markets (FSFR) stopped an additional placement of Russneft’s shares last week. FSFR had good reason to do so, as an Investigation Committee in the Russian interior ministry issued a statement saying that all of Russneft’s stock had been frozen by order of a Moscow district court. The news that Russneft president Mikhail Gutseriyev announced he was stepping down because of criminal charges against him aggravated the situation.
All Russian media, including Kremlin-loyal outlets covering the affair confirm that a group of siloviki (high-placed officials affiliated with security services and police with a hand in business) had a role to play in Gutseriyev’s removal. It should be noted that the news of the stock-freezing came at the moment when Gutseriyev was finalizing the sale of Russneft to Oleg Deripaska, owner of the Basic Element conglomerate, and one of Russia's richest men.
Russian business and information daily Vremya Novostei, citing sources inside Russneft, claims that the arrest of Russneft’s stock could be an action of a “third party,“ which, unlike Deripaska and Gutseriyev, “strives to transfer the property of Russneft to the state.” This third party, in the Russian newspaper’s opinion, is acting in the interests of Russia’s biggest state-owned oil major Rosneft, as well as in the interests of those behind the destruction of YUKOS.
Gutseriyev’s problems started in April 2007, when news of searches carried out at Russneft affiliates reached the public domain. On May 4th, an Interior Ministry Investigation Committee reported that a criminal case had been opened against Gutseriyev. The case, based on several articles of the Criminal Code, brings accusations of conducting illegal business activity inside a “criminal group” and on a large scale against Gutseriyev.
Initially, Gutseriyev did not seem to be disturbed by the news. Formally, his only misdeed was to extract more oil in the Ulyanovsk region than Russneft’s license stipulated. Bearing in mind that Russneft was one of Russsia’s top ten oil majors and that it extracted 14.8 million tons of oil in 2006 alone, compensating the state for extracting a few thousand “surplus” tons in Ulyanovsk did not seem to be a problem. “In 2007 we shall clear all the tax hurdles and continue our business as usual,” Gutseriyev promised journalists in June.
However, the hurdles simply refused to be cleared as the interior ministry and the prosecutors continued to search more intensively for Mr. Gutseriyev’s past misdemeanors. Experts in the Russian media immediately remembered that Gutseriyev could have made some very important people angry by buying YUKOS’ assets shortly before the company was destroyed by the state through enormous back tax demands.
Around the sam time, in June 2007, Price Waterhouse Coopers “withdrew” 10 years of audits it carried out on Yukos from 1996 to 2004, telling Russian daily Kommersant that “information provided to the auditors by the YUKOS management did not correspond to information received from the Prosecutor General's Office.” This in turn prompted Alfa Bank, part of the Alfa conglomerate controlled by Mikhail Friedman and known to be close to the Kremlin, to issue an extraordinary research note warning of “no guarantee that either the bank or its clients will not become the next victim” of state claims for unpaid taxes.
Since the most cherished of YUKOS’ former possessions have been passed on to state-owned Rosneft through a series of auctions, the answer to the age-long question “A cui bono?” (Who profits?) seems obvious in this case.
Gutseriyev’s resignation from Russneft was accepted by the company’s board of directors. This time he seems to be leaving for good. His statements during the last few days referring to the “unprecedented pressure” to which he was subjected by tax and police officials also suggest he is burning his bridges. However, Gutseriyev’s resignation does not mean that the struggle is over.
Analyzing the situation, Moscow-based Vremya Novostei points to the fact that Russneft can be bought by Deripaska only when the court lifts the freeze on the company’s shares. The court can only do so when Russneft’s new owner pays for the unlicensed extraction of oil in Ulyanovsk. If the state does receive due compensation for the over-extraction, it can renationalize Russneft’s shares. This seems to be the scenario most preferable to the siloviki.
This scenario, however, obviously does not suit Mr. Deripaska. If Russneft is renationalized, theoretically, Deripaska can still get hold of its stock if the state sells it via an auction. This, however, would not be the best solution for Deripaska, because his Basic Element would then have to compete with a bunch of other buyers.
In the meantime, Russneft’s value plummets as a Moscow arbitration court upheld tax claims for the second half of 2004 and all of 2005 last week, totaling 17 billion rubles.
Sources inside business circles claim that Deripaska could not start the process of buying Russneft from Gutseriyev without getting an “OK” from the Kremlin. So, what we are seeing as a result is most likely a battle of two powerful lobbying groups inside the Kremlin. |
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