Arguing that state energy companies should be privatised, Economic Development and Trade Minister German Gref on Tuesday said the demise of the oil giant had only hurt Russia.

Yukos's main asset, Yuganskneftegas, fell into state hands following a secretive December auction. A subsidiary that pumps as much oil as the US state of Texas is now held by a mystery state holding company.
  
Yuganskneftegas is nominally controlled by Rosneft - which is merging with the government-controlled natural gas monolith Gazprom in a move that would re-create the Soviet-era energy ministry in everything but name.
  
Analysts think Yugansk is now being held by a government shell to shield Rosneft and Gazprom from potential lawsuits.

It also leaves open the possibility of selling a part of the company to interested buyers in India and China. 
  
Russia's image

Gref said the chain of events that has confounded and upset investors was a fiasco that had to be quickly redressed to save Russia's image.
   

The chain of events surrounding
Yukos sale has upset investors

"I think that Rosneft and Yuganskneftegas, should it become a state-owned company, must be privatised," Gref told the Kommersant business daily.
  
"Today our government is ineffective and state companies, as a result, are for the overwhelming part ineffective as well," he said.

Gref holds a seat on the board of Gazprom and tried to stop it from taking part in the auction.

Kremlin economic adviser Andrei Illarionov had earlier called the Yugansk sale "the swindle of the year" in comments that later saw him lose most of his functions.

Crooked deals

Gref appeared to take a slightly more cautious line than Illarionov by agreeing with Russian President Vladimir Putin's arguments that companies such as Yukos were privatised in crooked deals and that the least they could do now was to pay a fair share of their taxes.
  
"I don't think that the oil sector was privatised in the best possible manner," Gref said of the shadowy 1990s deals in which massive energy companies were sold off to insiders at a small fraction of their actual worth - just like Yukos.
  
"But now we have enough means to regulate the oil industry and the ability to exact taxes," he said. "I view the state's direct involvement as unjustified today."