Putin attacks US in fierce defence of Yukos takeover

By Carl Mortished, International Business Editor



VLADIMIR PUTIN, the Russian President, yesterday poured scorn on the US legal system when he defended the takeover of Yuganskneftegaz, the Yukos oil production unit, by Rosneft, the Russian state oil company.
Angered by attempts to block the sale in Houston using Chapter 11 insolvency, the Russian leader said that the US court’s bankruptcy order was “unacceptable” and failed to recognise Russia’s sovereignty. “I’m not even sure that she (the judge) knows where Russia is located,” he said.

In a surprise move late on Wednesday, Rosneft acquired Baikal Finance Group, the mysterious vehicle that emerged on Sunday as the owner of Yugansk, bidding $9.3 billion (£4.8 billion) for the Yukos subsidiary, little more than half its estimated value. Gazprom, the giant gas utility confirmed that its takeover of Rosneft would go ahead, creating the prospect that the world’s largest gas producer would soon become a giant oil company producing almost 1.6 million barrels a day.

Yugansk was auctioned by the state to settle tax claims totalling $27 billion, which are rejected as bogus by the shareholders of Yukos.

However, President Putin defended the state’s actions as “absolutely legal, market mechanisms” and instead criticised Russia’s oligarchs, friends of the former president Boris Yeltsin. He said: “Some market participants got multibillion state assets using different tricks, including some violations of then existing legislation.” His criticism will be seen in Russia as a reference to Mikhail Khodorkovsky, the principal Yukos shareholder, who is in jail facing charges of tax evasion.

The Kremlin’s action has drawn little response in world capitals. Stuart Eizenstat, the former US Deputy Treasury Secretary, said that the Russian president was “getting away with one of the greatest corporate thefts in history”.

He said: “The reaction of Germany, France and the US has been: let the Russians be Russians, we have our political and economic interests there.”

(The Times, 12.24.2004)