Russia invites foreign Yukos bids

Foreign investors may be allowed to bid for the key oil producing subsidiary of embattled Russian oil firm Yukos.

Moscow authorities are forcing the sale of Yuganskneftegas, which accounts for 60% of the firm's oil output, to help settle Yukos' $8bn unpaid tax bill.

Analysts have questioned whether any overseas bids would be forthcoming, despite an official saying they would be welcomed.

Russian energy firms Gazprom and Surgut are tipped as the most likely buyers.

Both are said to be close to the Kremlin; Gazprom is 38% state-owned, and the Kremlin will own a majority shareholding if a merger with oil firm Rosneft goes through.

Legal minefield

Analysts said foreign companies were unlikely to bid for Yuganskneftegas because of Yukos's ongoing legal battles with the Kremlin.

This could see Yukos shareholders going to the courts to challenge the legality of any sale, they said.

"I would be very surprised if a foreign company wanted it," said Matthew Thomas, an oil and gas analyst at Alfa Bank in London.

"The shares [in Yuganskneftegas] are radioactive."

According to media speculation, the date for the sale of 77% has been set for 22 November.

Political matter?

Investment bank Dresdner Kleinwort Wasserstein (DKW) has valued the Yuganskneftegas business at between $14.7bn and $17.3bn, but other media reports suggest Russian authorities may give it away for a bargain $4bn.

Analysts have long speculated that politics is the main reason behind Russian authorities targeting Yukos, first for unpaid taxes, and now to sell off the main part of the business.

They say that Yukos is being punished because of the political ambitions of the company's former boss Mikhail Khodorkovsky.

Mr Khodorkovsky, who had supported liberal opposition groups, has been in prison since October last year on fraud and tax evasion charges.

Yukos, which currently produces 20% of Russia's oil output and accounts for 2% of global production, has seen its share price fall by two-thirds since April, amid the growing uncertainty about its future.

(From BBC News 18.10.04)