Putin May Repair Yukos Damage With Asset-Sale Amnesty

Russian President Vladimir Putin, seeking to restore investor confidence after tax demands brought down OAO Yukos Oil Co., by ending the government's ability to reverse the state asset sales of the 1990s.

Russia may ``remove the threat of property redistribution'' by cutting the statute of limitations on reviewing asset sales to three years from 10, Putin said today at a meeting in the Kremlin with 24 of the country's wealthiest businessmen. That may reassure Russia's industrialists, many of whom made their fortunes buying state assets cheaply after the Soviet Union collapsed in 1991.

Russia's RTS stock index jumped 2.4 percent, its biggest gain this year. The benchmark in 2004 had its worst year since 2000 as the jailing of Yukos's biggest owner, Mikhail Khodorkovsky, helped prompt a $7.8 billion capital outflow.

``This news, if it's retroactive, is what investors have been awaiting for a long, long time,'' said Jean-Louis Tauvy, who manages $200 million in Russian assets at Atria Advisors Ltd. in Moscow. ``There was a fear factor created by Yukos and now the probability this case was a one-off is pretty high.''

Shares Advance

The Moscow Interbank Currency Exchange Index added 4.1 percent to 597.00 at 5:48 p.m. local time, with all 18 shares rising, making it the biggest gainer among 60 national stock indexes Bloomberg monitors. Both the RTS and Micex lost 1.8 percent yesterday.

``We're making this proposal to stabilize property rights and to remove the threat of property redistribution,'' Putin said. ``I hope that will bring a long awaited calm to the business class by guaranteeing property rights.''

``The road to any further Yukos-style expropriations is looking reassuringly blocked,'' Christopher Granville, a strategist at Moscow-based United Financial Group, said in a note to clients.

Putin met with 24 businessmen, including Oleg Deripaska, Russia's fourth-richest man and the owner of OAO Russian Aluminum, the world's third-biggest aluminum producer, Alfa Bank Chairman Mikhail Fridman and Vladimir Potanin, the co-owner of OAO GMK Norilsk Nickel, the world's biggest nickel miner.

Improved Investment Climate

``This is a significant step on the road to strengthening property rights,'' Potanin said after the meeting. ``This leads not only to the improvement of the investment climate but also to the improvement of the social situation. The results of the meeting were encouraging.''

Russian Economy Minister German Gref told Putin on March 22 that slowing investment growth will have ``the most negative'' influence on the country's economy this year. Investments in Russia's industries rose 7.8 percent in February from the same month a year ago, compared with a 13.2 percent annual increase in February 2004.

Yukos founder and former Chief Executive Khodorkovsky, 41, has been jailed for the past 16 months on fraud and tax evasion charges, allegations he says are retribution for his support of political opposition to Putin. Yukos shares have plunged 96 percent since Oct. 25, 2003, when Khodorkovsky was arrested in Siberia and jailed in Moscow.

Russia in December seized Yukos's largest unit OAO Yuganskneftegaz, later bought by state-owned oil company OAO Rosneft, to cover part of tax bill of $28 billion, including claims against subsidiaries.

Yukos, Russia's largest oil exporter last year, won't ship any crude abroad in the second quarter of 2005, Interfax reported today, citing Yukos Deputy Chief Executive Alexander Temerko.

Yugansk will be split off from Rosneft to allow OAO Gazprom, Russia's state-owned gas company, to buy Rosneft, Gazprom Chief Executive Alexei Miller said this month.

Putin Consolidates

Putin, 52, is consolidating the government's energy interests in Gazprom. The government also plans to let only local companies bid for the largest oil, gas and metal fields, the Natural Resources Ministry said on Feb. 10.

The government should create a stable, predictable environment for business and guarantee property rights, Putin said. It also should help large companies develop internationally and create easier conditions for start-up companies, Putin said.

``We are preparing proposals for clearer regulation of tax procedures,'' Putin told businessmen today.

Oil Boom Slows

Russia's five-year oil boom may be ending as Putin increases government control over the industry, hurting investment in new wells, rigs and pipelines. Output will rise 3.8 percent this year, less than half the average rate during the past five years and the lowest since $10 oil hurt investment in 1999, the Paris-based International Energy Agency estimates.

Exxon Mobil Corp., the world's largest publicly traded oil company, in 2003 held talks to acquire a stake in Yukos, which then was the largest producer of Russian oil. Exxon Mobil Chairman Lee R. Raymond in December said he was wary of making large, new investments in Russia because of the Yukos crackdown.

Russia last year canceled the rights of Exxon Mobil, based in Irving, Texas, and San Ramon, California-based ChevronTexaco Corp. to the Sakhalin-3 oil fields in the Pacific Ocean, with an estimated 4.1 billion barrels of oil reserves, more than Russia's annual output. The fields also hold 1.5 trillion cubic meters of gas reserves, enough to fuel the U.S. for more than two years.

HERE