Rosneft snapped up the last production unit belonging to Yukos for a steep discount in a bankruptcy auction on Thursday, sealing the state-run oil major’s takeover of Mikhail Khodorkovsky’s empire, once Russia’s biggest. Rosneft beat the only other bidder to pay $6.43bn for the Samaraneftegaz unit and three refineries in a 10-minute auction.
The sole remaining major Yukos asset left to go under the hammer is the stone and glass Moscow headquarters, which is set to be sold on Friday in a symbolic end to an oil major that was once the favourite of western investors and just four years ago was set to be sold to US oil companies, ExxonMobil or Chevron.
Yukos finally expires, victim of its battle with the Kremlin
By Catherine Belton
The gavel will come down on Friday on the last asset belonging to former Russian oil giant Yukos, symbolically ending the company’s existence after a tortuous four-year legal battle with the Kremlin. In a bankruptcy auction, the shiny Moscow skyscraper built by Mikhail Khodorkovsky, Yukos’s jailed founder, will be sold in a final victory for Vladimir Putin’s increasingly autocratic presidency.
“This is the last rites,” says one western insider who once advised Mr Khodorkovsky. “It was inevitable once they attacked that the Kremlin would not stop until they got the lot.”
Kremlin throws the doors open on Yukos
By Catherine Belton
When Yuganskneftegaz, Yukos' biggest production unit, was sold for a knockdown price in a forced government auction in 2004, an obscure front company, Baikal Finance Group, bought the unit before selling it to state-controlled Rosneft. The elaborate arrangement, as Vladimir Putin, Russia's president, put it, was necessary to avoid legal risks.
Now, as Russia prepares this week to go ahead with the controversial bankruptcy sell-off of what was once the country's biggest oil company, foreign oil majors are stepping forward to take part in a process that Mr Putin had, at one time, said would be too damaging for the state.
Critics say the foreign energy majors may be bidding to curry favour with the Kremlin by legitimising the auctions or, at worst, as fronts to buy the assets on behalf of state-controlled Gazprom and Rosneft.
The foreign groups say their bids are for real. TNK-BP, BP's Russia venture, says its bid for Yukos' 9.44 per cent stake in Rosneft is a serious attempt to gain a strategic stake in a partner with which it has joint projects in eastern Siberia. Italian groups Eni and Enel, which announced their interest in a separate batch of Yukos' gas assets in January, say they are bidding for greater access to Russian reserves. All three have good reason to want to get on the Kremlin's good side. TNK-BP stands to lose its licence to develop the vast east Siberian Kovykta field. Eni and Enel signed off on a landmark deal with Gazprom this year to give it direct access to Italian distribution networks. But they are now awaiting direct access to Russian reserves. The break-up of Yukos over $33bn in back tax claims has led to a significant shift toward Kremlin control over the energy sector. It stands to renationalise much of the company's assets. It also led to Mikhail Khodorkovsky, Yukos' majority owner and a political opponent, being jailed on fraud and tax evasion charges. Yukos' former owners say they are not giving up yet.
Legal risks for any participant still loom. "These people are never going to get good title," said Tim Osborne, managing director of Yukos' main owner Group Menatep, now known as GML. "They are arguably going to be in receipt of stolen goods."
GML is pursuing a $33bn lawsuit in the international arbitration court in the Hague against Moscow for expropriation of its assets, while Yukos' former management has filed a suit against the government's back tax claims in the European Court of Human Rights.
Yukos claims the government broke its own law in levying back tax claims that amounted to more than the oil firm's total revenues. Moreover, they say, Yukos was never bankrupt. When a creditors' committee last year voted on whether to bankrupt it, GML valued its holdings at more than $30bn against debts of $18.2bn. The company's court-appointed receiver, Eduard Rebgun, valued its assets at just $17.7bn. Since then, Rebgun has adjusted that amount to $26bn. Shortly before, a Moscow court had boosted Yukos' total debts to $26.6bn.
In the meantime, analysts say that, by agreeing to participate in the auction, foreign companies could be starting to help the Kremlin win the PR war.
