MOSCOW (AP) — The curtain finally fell on the shattered Yukos oil empire yesterday, with a mysterious auction providing a dramatic conclusion to the politically charged, four-year demise of the company that was once Russia’s biggest oil producer.
From the gunpoint arrest of the company’s founder to the creditors’ decision to liquidate the company to pay off $30 billion in back tax bills, the case has been seen as a warning to Russia’s mighty tycoons to obey the Kremlin.
“It marked the end of the ‘Wild East’ capitalism of 1990s, when everything was for sale,” said Roland Nash, head of research with the Renaissance Capital investment bank.
“It marked the end of foreign investors coming in with rose-tinted spectacles believing that we were on a path toward Western-style transparency and corporate governance. It sent a strong message to all business that there was a new man in charge and no one was bigger than the Kremlin.”
Observers say OAO Yukos founder Mikhail Khodorkovsky angered President Vladimir Putin by sponsoring opposition parties in the run-up to 2003 parliamentary elections and maneuvering to sell part of Yukos to a major U.S. oil company, just as the Kremlin was increasing control over politics and the country’s vast energy resources.
Mr. Khodorkovsky, who was sentenced to eight years on fraud and tax charges in 2005, has watched his company’s dismemberment from behind bars. Earlier this year, prosecutors announced new money-laundering charges that would keep him in prison well beyond 2012 if convicted.
All of Yukos’ production assets and refineries now belong to the state-controlled oil company OAO Rosneft, which has dominated the liquidation auctions that began in March. Once an underachiever among Russian oil companies, Rosneft has become the biggest producer in Russia, pumping 2.1 million barrels per day — or the same as Nigeria or Iraq.
In a fitting echo of the many murky twists in Yukos’ downfall, the final auction yesterday came to an unexpected end.
Lot number 13, which included Yukos’ 22-story Moscow headquarters, should have been a victory lap for Rosneft. The towering downtown building would have made an appropriate home for the new oil giant that emerged from Yukos’ remains.
But an unknown company won the auction after a grueling 21/2 hours of bidding that saw the opening price nearly quintuple — an unheard-of result for the auctions, all of which have appeared to be closely scripted.
After 706 back-and-forth bids from Rosneft’s subsidiary Neft-Aktiv and OOO Prana, the mysterious company made the winning bid — $3.9 billion. By the end the auctioneer, who called three breaks in the bidding, was sounding hoarse.
The bidding recalled the first auction for a major Yukos asset in 2004, when an unknown company called Baikalfinansgroup made the winning bid for production company Yuganskneftegaz — and was itself later bought by Rosneft.
Mr. Khodorkovsky, a former Kremlin insider in the 1990s, had taken advantage of his close ties to former President Boris Yeltsin to snap up Yukos for just $300 million. At the peak of its capitalization, the company was worth about $40 billion and was considered one of Russia’s most transparent and best-run companies.
Though investors lost billions as Yukos’ back tax bills mounted and its market value nose-dived, the stock market has surged since Mr. Khodorkovsky’s verdict.
Despite dire predictions from Mr. Khodorkovsky’s supporters, foreign capital has flooded into Russia, lured by its booming economy, which has been spurred by high energy prices. When it became clear that the back tax probes would not be extended to other companies, investors piled back in, noted Eric Kraus, managing director of the Nikitsky Russia hedge fund.
“There is a perception that Yukos was a fight between a rogue oligarch and Putin,” Mr. Kraus said. “And no one was quite crazy enough to repeat that.”
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