Former Soviet President Mikhail Gorbachev has also added his voice to the pro-Rosneft roadshow. His commentary in the "Financial Times" on July 11 clearly toed the current Kremlin line. "Rosneft's privatization is in sharp contrast to the auction of state assets in the early 1990s," Gorbachev wrote. "The Yeltsin-era sell-offs were far from transparent and major state assets were transferred into the hands of a 'trusted' few.... By contrast the government today is managing this privatization, learning from past experience."
The much-delayed date for the start of trading in Rosneft shares is now scheduled for July 19, according to "The Moscow Times." The paper reported that Britain's market watchdog, the Financial Services Authority (FSA), has approved the listing of Rosneft, but for unexplained reasons, delayed the start of trading until after the July 15-17 G8 summit in St. Petersburg.
One possible reason for the delay is that the FSA had to consider a complaint from Yukos oil company that claims that listing Rosneft is tantamount to selling stolen property, a charge raised earlier by critics of the IPO, including prominent investor George Soros, who wrote in the "Financial Times" on April 26 that the IPO "raises serious ethical and energy security issues."
Critics say that the IPO will allow Rosneft to walk away unscathed from its 2004 controversial and opaque takeover of Yuganskneftegaz, Yukos's largest production unit. Furthermore, critics are concerned that a successful Rosneft IPO will only encourage Russia's leaders to seize energy assets by any means possible.
Yukos says that if the British FSA fails to explain why it has allowed the IPO to take place, it could appeal to London's High Court for a judicial review, which would necessitate a temporary halt of the sale in London.
Yukos is not alone -- influential member of the U.S. House of Representatives, Tom Lantos, is questioning the involvement of JP Morgan Chase and Morgan Stanley, two of the global coordinators in the IPO.
Lantos, who is the senior Democrat on the House International Relations Committee, believes that they might risk violating U.S. anti-money laundering laws. He questions whether financial institutions with access to U.S. payment systems should be allowed to trade in assets that were acquired "contrary to or in violation of U.S. laws and acceptable market practices," the "Financial Times" reported on July 12.
Despite the opposition, Rosneft's managers seem intent on enticing investors. Speaking on April 24 at the Russian Economic Forum in London, Rosneft President Sergei Bogdanchikov claimed that the company could be the world's largest oil producer by 2015. He told the audience that production is set to double over the next decade to 3 million barrels per day as the company develops new oil fields in Sakhalin.
The delay of trading in Rosneft shares on the London exchange could also be linked to the upcoming G8 summit in St. Petersburg. Russian energy promises to be the main topic of discussion. Western decision makers could well be taking a wait-and-see attitude to how the G8 meeting goes before making a final decision on what to do with Rosneft.
If Russia continues to deny greater Western access to its energy infrastructure, then the IPO could be in for problems in London.
If, on the other hand, the summit participants judge that Russia is being more flexible and amenable to modifying its stance, Rosneft could get the green light.
An oil field in Russia's Republic of Bashkortostan (TASS file photo)
ENERGY SECURITY is increasingly moving to the top of the EU's agenda in its dealings the outside world. A recent report identifies the European Union's main energy objectives as not just securing gas and oil deliveries from Russia, but also ensuring that it has reliable alternative sources, including in Central Asia. Nonetheless, EU officials say relations with Russia take center-stage in their thinking....(more)