Mystery firm wins Yukos auction

Baikal Finance Group, an unknown company, has won an auction for Russian oil company Yukos’ core asset with a $9.4 billion bid.

Many say Khodorkovsky is the victim of a Kremlin campaign
Many say Khodorkovsky is the victim of a Kremlin campaign

Gazprom, which had been favoured to win but was outbid, declared it had no links to Baikal. Analysts still believed the state-controlled gas giant or other state interests might have had a hand in the winning bid for Yuganskneftegaz.

Yukos is widely seen by analysts as the victim of a Kremlin campaign to crush its politically ambitious owner, Mikhail Khodorkovsky, and seize control of strategic sectors of the economy sold off in the chaotic privatisations of the 1990s.

Khodorkovsky is now on trial for fraud and tax evasion and faces 10 years in jail if convicted.

Baikal bid

Baikal, named after a huge Siberian freshwater lake in the heartland of Russia’s oil industry, bid 260.75 billion rubles ($9.4 billion) for Yuganskneftegaz, said the sale’s organiser, the Federal Property Fund.

Baikal won the auction with a $9.4 billion bid

Baikal won the auction with a
$9.4 billion bid

Under Russian law the government can order a new auction or seize Yuganskneftegaz in lieu of unpaid taxes if Baikal fails to pay the full amount it has bid within 14 days.

The sale of Yuganskneftegaz, which pumps more oil than Opec member Qatar, went ahead despite a US court order barring Gazprom and its foreign bankers from bidding, pending further proceedings in Yukos’ application for US Chapter 11 bankruptcy protection.

Baikal, which was not one of three originally registered bidders including Gazprom, may have been a hastily assembled vehicle allowing Russian state interests to get around the US court order, one analyst said.

Legal risk

“The political signal from the government on Friday was they would go ahead and they have found a way to go ahead that minimises legal risk,” said Chris Granville, a strategist for investment bank UFG.

“The company considers that the victor of today’s auction has bought itself a serious $9 billion headache”

Alexander Shadrin,
Yukos spokesman

“There were three registered bidders and all three were named in the restraining order. Now the surprise is that a new entity emerges. The Russian state was not named in the restraining order nor was this entity,” he added.

Russian news agency Itar-Tass said one of its reporters had checked the address given by Baikal in the town of Tver, 200km outside Moscow, and had found a building housing a mobile phone shop and a food store.

“I see no plausible explanation for the theory that Baikal was representing competing interests,” said Paul Collison, a strategist with UBS in Moscow. He added that Yugansk was likely to end up with Gazprom or directly in the state’s hands.

Tax bill

Gazprom had put in an opening offer for 76.79% of Yugansk representing 100% of voting interests at the minimum sale price of 246.8 billion rubles ($8.87 billion) but withdrew after Baikal made the winning bid. 

Analysts say the firm behind the bid had the Kremlin’s backing

Analysts say the firm behind the
bid had the Kremlin’s backing

The auction was ordered to raise funds to help pay Yukos’ $27.5 billion back-tax bill, the result of a relentless assault by the authorities which analysts say is aimed at breaking up the company.

It leaves Yukos stripped of its main asset, which pumps about one million barrels of oil a day. The company may file for liquidation to protect its remaining assets from forced sale.

A Yukos spokesman said on Sunday that whoever was behind the winning bid would be pursued through the law courts.

Legal action threat

“The company (Yukos) considers that the victor of today’s auction has bought itself a serious $9 billion headache,” Yukos spokesman Alexander Shadrin said. 

“Those who stand behind the winner have subjected their business to considerable legal risks. We declare that the sale of Yugansk is illegal,” he said.

Before the auction, lawyers for Menatep, a group through which Khodorkovsky and his associates control Yukos, pledged to extend their fight against the sell-off to other countries.

They told a news conference in Moscow they would seek injunctions in foreign courts seizing Russian oil and gas exports.

Investor confidence

Menatep head Tim Osborne said after the auction that Yugansk’s new owners were “on notice that this is an illegal expropriation and I’m sure we’ll be in touch with them”. 

Yukos’ troubles have already helped push oil prices to peak levels over the past few months and concerns over supplies from the world’s second-biggest oil exporter could grow after Sunday’s threat of legal action from Menatep’s lawyers. 

The assault on Yukos has also shaken investment confidence in President Vladimir Putin’s Russia, where the economy is showing signs of slowing despite high oil prices.

The US bankruptcy action appeared to have sunk plans for the already heavily indebted Gazprom to get funding for its bid
from a consortium including Deutsche Bank and JP Morgan.

Gazprom, the world’s largest natural gas company is at the centre of plans to create a huge state energy holding company, but the fact that it supplies a quarter of Europe’s gas makes it vulnerable to international court rulings. 

Source : Reuters

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