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Russia: Oil Companies Complain About Economic Policies

Moscow, 23 July 1998 (RFE/RL) -- A public dispute broke out yesterday among Russia's big energy companies after Lukoil issued a letter critical of the government's economic policy.

The letter attacked recommendations given to Russia by the International Monetary Fund. It said that they would make the current financial crisis deeper, complicate the social situation in the country and lead to mass bankruptcies. The letter was said to have been signed by seven other energy companies, but several have quickly denied doing that.

In effect, the daily "Vremya MN" today published two versions of the letter. The first, including the names of Lukoil, Yukos, Sidanko, Tyumen oil company, Surgutneftegaz, Sibneft, Komitek and Gazprom as signatories, is a moderate appeal to Yeltsin to revoke his veto on cuts in the oil excise tax. According to the paper, as well as to reports in "Kommersant" and "Russki Telegraf," this version was revised and approved by the heads of the oil companies two days ago.

The second version, which was distributed to the press yesterday, attacked the government and IMF policies, claiming that they threaten public unrest. It is this second version that is at the heart of the dispute.

Gazprom chairman Rem Vyakhirev was the first to react. Vyakhirev, who this week started a new round of negotiations with Prime Minister Sergei Kiriyenko on the payment of back taxes, told the Interfax news agency that his company had not signed any letters and added that "one cannot manipulate Gazprom's name in such an irresponsible way."

Gazprom's reaction prompted denials from Sidanko, Surgutneftegaz and Tymen oil company (TNK). Semyon Kukes, TNK chairman told Russian newspapers that he had agreed with the spirit of the first appeal, but that he did not approve the criticism toward the government and the IMF.

According to "Vremya MN," only Lukoil and Yukos have confirmed to have signed the letter issued yesterday.

Russian energy companies have been hit by the recent crisis as well as the worldwide decline in energy prices. Already at the beginning of this week, Fuel and Energy Minister Sergei Generalov had said that oil producers were "unhappy" about the government tough tax policies. Before being appointed to cabinet in April, Generalov was a top official in the Menatep-Rosprom concern, that controls one of Russia's main oil producers, Yukos. He is seen as still maintaining strong ties with the company.

Generalov's comment appeared to indicate that the oil magnates who at the beginning of June had pledged, together with other top business leaders, to cooperate with the government in finding ways to deal with the crisis, intended to put pressure on the government in order to protect their interests. Yesterday's letter might be a move to open negotiations with the government over the issue.

But some of Moscow leading newspapers today said that the letter's accusations and threats would hardly win understanding in the Kremlin.

The daily "Kommersant," carried today a first-page article under the headline "False start." It said that the letter marked an end to the "gentlemen agreement" on cooperation concluded by the Kremlin and the so-called "oligarchs" in June.

"Vremya MN" said that the letter's "the political character" was "surprising" because so far this has characterized mainly communist and nationalists opponents to Yeltsin. Until now, the paper said, "the dialogue of big oil magnates with the government had been restricted to business-like tones, which had led the government to demonstrate understanding to the interests of the industry."

According to the paper, the rift between authorities and big business is due "to the breakdown" of the unspoken understanding that "big business would determine on its own how much tax money it would pay." The recent government effort to extract due taxes from Gazprom, Russia's main tax delinquent, was a warning to other major businesses, the paper said.

Deputy Prime Minister Boris Nemtsov said yesterday the government does not intend to approve new tax breaks for oil companies. He also said that the government has already cut taxes and fees for oil companies to compensate for the slum in world oil prices. And he added that because the parliament had last week failed to approve a package of the anti-crisis measures, the government could not afford considering cutting oil excise taxes.

Nemtsov said, however, that if the Duma at a special session planned for mid-August passes fiscal measures included in the anti-crisis program, the government "may be ready to return to the question of lowering oil excises."

Anatoly Chubais, head of the Unified Energy Systems and Yeltsin's representatives in negotiations with international financial institutions, said that he would not accept "big business setting the political atmosphere of the country."

Chubais was talking after he returned to Moscow from negotiations with the IMF on an emergency bailout package for Russia.

The IMF representative in Moscow, Martin Gilman, told "Vremya MN" today that $2.9 billion part of the bailout package is designed to compensate Russia for the damage to its oil industry from depressing world oil markets. But Gilman also said that the IMF regards Russia's oil industry as only one of many sectors of Russian economy experiencing a crisis.