Curtain falls on final act of Yukos farce

Nikolai Gogol, Russia's 19th century master of the absurd, would have been proud of a drama played out in Sunday's auction of Yuganskneftegas, the main production unit of the Yukos oil company.


The highly anticipated auction - the final act of a 17-month government-led offensive against Yukos - was to start at 4pm. A few hours earlier armed policemen cleared the space surrounding the Federal Property Fund that was conducting the auction.

The audience - the world's media - was crowding outside the iron gate waiting to be admitted to “the sale of the century”.

The lucky ones whose names were on a list were waved through. The less fortunate - including two US lawyers for Menatep, Yukos's largest shareholder - were kept out in the cold in the drizzly rain.

Inside the building, plain-clothes security men were strategically positioned at every corner and in every elevator, ferrying journalists to the 16th floor of the Soviet high rise where large screens were set up to relay the auction proceedings.

“I have done a lot of jobs, but this is the first time I've worked as a lift attendant,” said one security guard with the rank of captain.

The actual auction took place 12 floors down, but the lifts did not stop there.

The sale was conducted with absurd formality. A committee of men in business suits presided over a long table. Opposite them there were three tables for the bidders only two of which were occupied.

After explaining the procedures, a procession of committee members disappeared into a back room “to make sure” that deposits of $1.7bn required for the auction had been paid and that bidders were legitimate.

After what seemed an interminable wait, the committee members returned and awarded two bidders with special participant badges and large lollipops with the numbers 1 and 2 written on them.

Number 1 was an unknown company, Baikal Finance Group. Number 2 was Gazpromneft, the oil arm of Gazprom, the gas monopoly. Nobody in the room doubted that Gazpromneft had a lead part, while Baikal would play a supporting role.

The committee handed the floor to the auctioneer a man in a black tie with an overwhelming sense of his historic role. In an operatic voice, the auctioneer read out the rules of the auction: participants were not allowed to use mobile phones, move around or leave and re-enter the room. Most important, they were instructed to place their bids “in a loud and clear voice”.

Bidder number one Baikal raised its lollipop and placed a bid of Rbs260.75bn ($9.3bn) so quietly that the auctioneer misheard it and repeated in a loud voice that a starting bid of Rbs246.75bn ($8.6bn) had been made. Nobody objected.

The auctioneer turned to bidder number 2, requesting that it place its bid. But Gazpromneft's representative asked to make a call and left the room in clear violation of the rules.

After a couple of minutes he silently re-entered the room and sat down. This prompted Baikal to repeat its bid of Rbs260.75bn, but Gazpromneft remained silent.

The auctioneer called the price three times, then brought the hammer down.

A mysterious company, which appears to have been registered only few weeks ago in the provincial town of Tver, was declared the winner of one of the largest oil assets in Russia.

As in Gogol's classic play The Government Inspector, in which a bunch of crooked provincial town officials are outwitted by an imposter, a stunned silence fell upon the hall.

(Financial Times, 12.20.2004)