Russian minister opposes Gazprom purchase of Yukos unit: reports

MOSCOW (AFP) - Russia's economy minister German Gref is reportedly trying to halt plans by the gas giant Gazprom to bid for the main production unit of embattled Yukos, but will likely fail, analysts said.

On Tuesday, a top official at Gazprom said the company would bid for Yukos's subsidiary Yuganskneftegas at a December 19 auction, confirming long-held rumors that the state would take over the unit that produces about the same amount of oil per day as the US state of Texas.

But Gref, the economic trade and development minister who sits on Gazprom's board of directors, prevented the board from approving the measure later in the day, according to participants at a board meeting.

"It was clear at the board meeting that he did not agree with it," the respected Vedomosti quoted an unnamed board member as saying.

But analysts said that the reformist minister was unlikely to influence the purchase that, according to observers, is being decided by political considerations at the Kremlin.

"Gref's lone stand against the Yukos affair steamroller is unlikely to come to anything," said the UFG brokerage in a research note.

Gref is concerned that a Yugansk purchase would open Gazprom, the world's largest gas producer, to lawsuits from Yukos shareholders, amid strong doubts that the auction is legal, according to Vedomosti.

The minister also disapproved that Gazprom, in order to raise cash to acquire Yugansk, planned to scale back its investments by about 3.6 billion dollars (2.7 billion euros) and borrow the rest to cover the 8.6 billion-dollar starting price, the official told Vedomosti.

As a result of his objections, the board delayed a decision on the Yugansk purchase, reports said. Gref kept up his criticism the next day in parliament, when he told deputies that he frowned upon "an increased government presence in market sectors of the economy," a clear allusion to the deal.

Interfax quoted a Gazprom official as saying that the board would likely decide on the issue before Tuesday.

Yugansk is the crown jewel of Yukos, pumping some one million barrels of oil a day, and rumors have swirled around Russia's market for weeks that the government would try to take control of it through an affiliate.

The state is auctioning off 76.79 percent of Yugansk, which accounts for more than 60 percent of production at Yukos, in order to cover what it claims is 24.5 billion dollars in back taxes, penalties and fines owed by Yukos, Russia's largest oil producer.

Gazprom's board is highly unlikely to go ahead with a bid without approval from the government, but analysts said that Gref's objections were unlikely to prevent the deal.

"The decision has been made by the Kremlin. It's impossible that the directors will go against its will," said Alfa Bank analyst Christopher Weafer.

Ron Smith, oil and gas analyst at Renaissance Capital, agreed.

"All the body language of the last two or three weeks has said that... just Gazprom was... the only one really welcome to bid" on Yugansk, Smith said.

"I'll be a bit surprised if at this late stage in the game... Gref was able to turn the ship," he said.

Many observers in Moscow say that the government has sought to dismantle Yukos through its investigation of the firm to punish its founder Mikhail Khodorkovsky for his political ambitions.

Khodorkovsky, who had openly criticized Kremlin policies and funded opposition parties ahead of last year's parliamentary vote, has been in jail for more than a year as his fraud trial grinds on.

President Vladimir Putin has repeatedly denied such charges.

The government investigation into Yukos has wiped out most of its market value. Yukos shares closed Thursday at 1.05 dollars, down from their high of 16 dollars before Khodorkovsky's arrest in October 2003.

(From AFP via Turkish Press, 12.2.2004)