Kremlin completes theft of Yukos' main assets

Background:
W's pal "pootie-poot" (that's the Prez' nickname for Putin) completed his outright state-engineered theft of the assets of the company of his chief political rival. If you want a timeline of how blatantly it was done,there's a timeline here (it is a pro-Yukos site so it may be slightly biased against the Kremlin). Essentially, the government came up with a bogus 8 figure back tax bill, and then added 2 more when it appeared the company could pay the first. The government then seized the main asset of the company and sold it to it's self by way of a front company registered in a supermarket in a town 2 hours north of Moscow. This was done by way of a Tax ministry auction and the asset was bought for a fraction of it's real value. This was done even though Russian law states that core assets shouldn't be sold to pay tax debt.

Most outside observers think it's clear that the impetus for the theft was the fact that the head of Yukos was opposed politically to Vladimir Putin.

From SFGate

The other shoe dropped Wednesday in the mysterious, backroom deals that have quietly handed the Kremlin control over the embattled Yukos oil giant's most important production unit -- an apparently secret, no-bid sale to Russia's state-owned oil company Rosneft.

ITAR-Tass and Interfax reported that Rosneft had bought 100 percent of shares in the virtually unknown BaikalFinansGroup, in a deal that appeared to move the unit one step closer to ownership by state-controlled gas giant Gazprom. The government had been planning to fold Rosneft into Gazprom's oil assets and form a new company that would buy the unit, but its plans were temporarily halted by a U.S. bankruptcy court injunction in Houston.

With the latest purchase, the Russian news agencies said, Rosneft gets more than three-quarters of the shares in Yukos' Yuganskneftegaz production unit, which BaikalFinansGroup bought at a government auction on Sunday for $9 billion. Yukos auditors put the value of the production unit at about twice that amount.

It was not immediately clear why Rosneft would not receive entire 100 percent of shares in Yuganskneftegaz, which pumps about 11 percent of Russia's oil.

The Kremlin move to dismantle Yukos, once seen as the most transparent business in post-Soviet Russia, has severely damped the enthusiasm of Western investors -- especially big oil companies.

The Russian government's targeting of Yukos and its owners has been seen as a Kremlin-driven effort to seek retribution for former CEO Mikhail Khodorkovsky's funding of opposition parties and complaints of government corruption.

President Vladimir Putin has characterized the effort as a crackdown on corruption and dubious accounting. Khodorkovsky is being tried for fraud and tax evasion, and has been jailed for 14 months.

Robert Ebel, director of the energy program at the Center for Strategic and International Studies in Washington, said Putin appears to be trying to leverage Russia's vast oil and natural gas resources "to restore Russia as a power among nations."

"Certainly the overall strategy is not only to punish Khodorkovsky," Ebel said. "I think Putin has finally come to realize the power of oil, not only as a means of financial power but that there's political power as well. There's leverage he can use."

"What other better way to do it but through oil and gas," Ebel said.

Alexander Stepanenko, spokesman for Rosneft, confirmed the deal to Dow Jones Newswires early Thursday.

"The owners of BaikalFinans made us an offer to sell their company, and we took it," Stepanenko said. He would not disclose the purchase price.

No one answered the phones at Rosneft headquarters in Moscow.

A spokesman for Yukos in Houston, where the embattled oil company is seeking U.S. bankruptcy protection, could not confirm the reports, but said the company will pursue actions against anybody who participates or is involved in the sale.

"Essentially, it doesn't matter to us," spokesman Richard Mintz said. "It is the world's most expensive game of hide-and-seek."

"We are going to sit back and see what develops and take appropriate action after we see what happens," Mintz said.

The deal, if confirmed, moves Gazprom nearer to controlling Yuganskneftegaz and is the latest in a web of legal actions and international maneuvering by Russia's government and the country's energy giants.

In the past several months, the government had announced it would fold Rosneft into the oil assets of Gazprom and form a new company.

That company, called Gazpromneft, had been widely expected to purchase Yuganskneftegaz at Sunday's auction, which the Russian government arranged to pay off more than $28 billion in back taxes it says Yukos owes.

But Gazpromneft was stopped just days earlier by an U.S. bankruptcy court injunction in Houston, where Yukos lawyers were seeking Chapter 11 protection.

BaikalFinansGroup was registered only last Friday to bid at the auction. It made the winning bid for Yuganskneftegaz on Sunday.

Yukos has said Yuganskneftegaz is worth much more.

"The impact, if any, Rosneft's actions will have on the bankruptcy court proceedings is something we are currently assessing," said Tony Davis, an attorney representing Gazpromneft at the Houston bankruptcy hearings, which were set to resume Jan. 6.

If Yuganskneftegaz is folded into a Gazprom-Rosneft structure, it would give Gazprom a daily oil production capacity of 1.6 million barrels, putting it on the same level as some of the world's largest international oil companies, according to Washington-based consultancy PFC Energy.