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Analysis: What's Next For Yukos?

Mikhail Khodorkovskii (file photo) The drama around embattled Russian oil major Yukos reached its culmination on 7 July when the "Financial Times" reported that jailed former Yukos CEO Mikhail Khodorkovskii has offered to surrender to the state the 44 percent stake in the company that he and other major shareholders control in order to keep Yukos from being driven into bankruptcy. The daily reported that Khodorkovskii sent the offer to Prime Minister Mikhail Fradkov and to Finance Minister Aleksei Kudrin in a letter that asks the government to unfreeze the company's bank accounts and to give the company three years to pay its tax arrears. This information was confirmed the same day by Khodorkovskii's lawyer Anton Drel, RTR reported.

Khodorkovskii's last-ditch appeal was prompted by a raft of legal and financial measures by the state against Yukos over the last week, steps that brought the company to the verge of bankruptcy despite President Vladimir Putin's 17 June statement that the government does not wish to see the company go under.

On 1 July, court bailiffs accompanied by armed police officers arrived at Yukos's Moscow headquarters to present a demand for payment of $3.4 billion in unpaid taxes, fines, and penalties stemming from 2000. The same day, bailiffs froze all the company's domestic bank accounts and the Tax Ministry announced that it has filed an additional demand for $3.4 billion for taxes allegedly owed from 2001. The ministry also said that it is investigating the company's records from 2002 and 2003. A Yukos spokesman stated that the freezing of the accounts could halt the company's production and hamper its efforts to pay taxes and creditors.

On the weekend of 3 and 4 July, several dozen officers from the Prosecutor-General's Office and the Interior Ministry searched Yukos's Moscow headquarters, including the offices of the company's newly installed senior management, "Izvestiya" reported on 5 July. They reportedly confiscated documents and computer hard drives.

On 5 July, a syndicate of Western banks led by Societe Generale notified Yukos that it has defaulted on a $1 billion credit extended to the company in September. Yukos CEO Bruce Misamore issued a statement saying that "the actions of representatives of the Russian government have driven the best and most creditworthy Russian company into an unintended and artificial state of insolvency and even possible bankruptcy," AP reported.

On 6 July, Prosecutor-General Vladimir Ustinov told Ekho Moskvy that Yukos will likely face additional tax claims for 2002 and 2003. "It is like a snowball," Ustinov said. "This case has begun, but it is impossible to see the end." Ustinov added that Yukos shareholders should pay the company's tax debts from their dividends. "The assets of Yukos are now frozen, that is, the ones that are the subject of the probe," Ustinov said. "But there are dividends. Huge ones, many billion dollars. From them, the taxes can easily be paid."

Most analysts agree that the campaign against Yukos began last May when the National Strategy Institute, headed by Stanislav Belkovskii, issued a report accusing the country's oligarchs of plotting a creeping coup (see "RFE/RL Russian Political Weekly," 7 April 2004). Moreover, few doubt that Belkovskii was simply expressing the will of the Kremlin. However, commentators differ on just what exactly are the Kremlin's genuine intentions.
"It seems as if the state would like to create a triad of energy companies under its management: Unified Energy Systems (EES); Gazprom; and, let's say, Nefteprom, which would include Yukos and Rosneft and would account for 20 percent of Russia's oil production." -- "Izvestiya"

Some believe the Kremlin's motivation is political and its goal is to eliminate an uncontrolled agent that used its resources to support some of the Kremlin's political opponents. "Perhaps the Kremlin's real motive is to split Mr. Khodorkovsky from his money," the "Financial Times" commented on 5 July. "By breaking Yukos, the authorities can destroy most of his wealth."

Other analysts, though, believe the Kremlin's objective is the more prosaic one of simply taking under control the revenues of one of the country's most successful oil companies. "Izvestiya" commented on 3 July that the major oil companies should either be controlled directly by the state or sold to someone that the state chooses, while the government retains a blocking stake. "It seems as if the state would like to create a triad of energy companies under its management: Unified Energy Systems (EES); Gazprom; and, let's say, Nefteprom, which would include Yukos and Rosneft and would account for 20 percent of Russia's oil production," the daily wrote.

Former Deputy Finance Minister and former Central Bank Deputy Director Sergei Aleksashenko, who is now vice president of Vladimir Potanin's Interros group (which owns "Izvestiya"), told Ekho Moskvy on 5 July that the two goals actually go together and that the first is impossible without the second. He said the government is trying to force Khodorkovskii, Menatep Chairman Platon Lebedev, and other major Yukos shareholders to sell their stake in the company, a necessary step to taking over ultimate control of Yukos. "I think that Khodorkovskii and the other major shareholders are more interested in their personal freedom than in saving the company, which they actually cannot help now anyway," Aleksashenko said.

Belkovskii on 5 July posted his predictions about the fate the Kremlin is preparing for Yukos on the National Strategy Institute's website ( He said that the Kremlin will implement a plan lobbied by presidential-administration deputy head Igor Sechin to create a new holding based on the two state-run energy giants Gazprom and Rosneft, which together will acquire about one-half of Yukos's assets.

According to Belkovskii, the new holding will buy the Yukos shares of foreign minority shareholders. Chukotka Autonomous Okrug Governor Roman Abramovich will then buy the other half of Yukos, which includes Yukos's 35 percent stake in his former company, Sibneft, with the understanding that he will then resell this stake in Sibneft to French oil major Total.

Belkovskii noted that this scheme would mean that, at least nominally, Putin's statement against bankrupting Yukos would hold true. He added that the new holding will be headed by Sechin himself. Sechin is widely expected to be named board chairman of Rosneft soon.

Belkovskii wrote that the only thing that could hamper such a scenario would be the appearance of a major Western oil company interested in buying Yukos in its present form. He said that Putin discussed possible developments regarding Yukos with "a European leader" during the June summit of the Group of Eight (G-8) leading industrialized countries in the United States. From the context, it seems apparent that Belkovskii is alluding to French President Jacques Chirac and that the discussion included mention of the sale of Yukos's Sibneft stake to Total.

Obviously, Belkovskii concluded, such a scenario does not bode well for Khodorkovskii.

Although the finale of the Yukos saga is yet to come, it seems clear that the ending will not be a happy one either for Yukos or for Khodorkovskii. Moreover, the scandal has caused considerable damage to the overall political situation in Russia. Yabloko leader Grigorii Yavlinskii told Ekho Moskvy on 5 July that the Yukos affair is being duplicated on the local level in many federation subjects, with local authorities using law enforcement organs to pressure businesspeople to change their behavior or to destroy the businesses of renegade entrepreneurs. "In the 1990s, we created an economic system in which business and power were interconnected like Siamese twins," Yavlinskii said. "Now watching them fight one another creates a very depressing impression." He added that he understands the feelings of people who feel no sympathy for either side.

"In 1992, inflation was 2,600 percent and tens of millions of people lost all their savings and the savings of their parents," Yavlinskii said. "Then two or three years afterwards all of a sudden a group of young people appeared and said that they are billionaires, without any explanation of how they got their property, how, why, and for how much it was sold to them."

Yavlinskii said that the political class's main mistake was that it has not made any legal and political evaluation of the privatization process. Instead, the government is using selective, arbitrary "justice" and "in fact has begun a crippling renationalization." "And all this is happening not openly, but behind the scenes, which is destroying both the Russian economy and public trust," Yavlinskii concluded.