01 June 2004 00:00
An assertive Kremlin puts oil investors on egg shells: Yukos has made executives more conscientious and the state more greedy, writesAndrew Jack
ByLine: By ANDREW JACK
While Mikhail Khodor-kovsky, the Russian tycoon, has been in detention for
seven months awaiting a fraud and tax evasion trial due to start next week,
investors and business executives have been busy adapting to a more assertive
state role in Russia's natural resource sector.
After a decade of post-Soviet chaos dominated by a handful of politically
influential business oligarchs, most analysts detect a renewed assertiveness
among the authorities under President Vladimir Putin.
Their concerns have been sparked by the crackdown on Mr Khodorkovsky and
Yukos, his oil company, which faces court tomorrow on tax charges that could
lead to bankruptcy.
"In the non-resource sector, the state is quite happy to let the free
market generate growth and diversification," says Roland Nash, head of
research at Renaissance Capital, a Moscow investment bank. "But it seems
very clear that Mr Putin wants to make sure the state calls the shots in the
natural resource sector."
One of the most important signs of a change in the oil industry in the past
few months is in tax payments. After years of opaque accounting and
aggressive tax minimisation schemes, Russian companies are portraying
themselves - and acting - as upstanding corporate citizens.
Lukoil, a Yukos competitor that reached a settlement with inspectors over a
tax optimisation scheme in Kazakhstan, has indicated it will not deviate from
the statutory nominal rate of 24 per cent corporate tax.
Foreign companies operating in Russia are making similar moves. Bob Dudley,
the chief executive of TNK-BP, the oil group in which BP owns 50 per cent,
says: "We recognise that tax is going to go up and we are fully prepared
to comply. It should be 24 per cent."
Viktor Vekselberg, one of TNK-BP's biggest Russian shareholders, went a
step farther, buying Malcolm Forbes's collection of nine Faberge eggs
for Dollars 100m (Pounds 55m) and then lending them to the Kremlin for an
exhibition.
Mr Putin, in his state of the nation address last week, warned companies
against tax dodging and raised another issue: state control of the oil
pipeline network and, by implication, production. Priorities have shifted
radically since Yukos planned a year ago to help build oil links from western
Siberia to Murmansk and eastern Siberia to China.
Sergei Grigoriev, deputy head of Transneft, the state-controlled oil pipeline
operator, shrugs off suggestions that a Murmansk link is being considered and
says a route operated by his company will run through eastern Siberia to the
Pacific coast instead of China. There is also no sign that Gazprom, the
state-backed gas group, will relinquish control of the gas pipeline network.
The third issue raised by the Yukos troubles is that of control over
Russia's oil and gas reserves. The prospects of confiscating Mr
Khodorkovsky's stake if he is convicted, and of bankruptcy of the
company, have raised the possibility that the state may pass Yukos on to
another company closer to the state, or create a holding company.
Already rivals are eyeing parts of Yukos. The region of Yakutia has awarded
Surgutneftegaz the right to develop a field previously explored by Yukos.
Alexei
Miller, the head of Gazprom, has talked about the importance of patriotism in
the allocation of new licences.
But Mr Putin appears more ambivalent. Last week he stressed the need for
stability and reiterated his support for the transparent sale of licences
through auction. And Yury Trutnev, his natural resources minister, has
threatened legal action against Surgutneftegaz for the way it acquired
Yukos's forfeited field.
Foreign companies eyeing the Russian market argue that the Kremlin is
balancing its desire for direct control of natural resources with the
prospect of more technology, capital and efficiency from abroad. "If
Gazprom and Rosneft (a state controlled oil company) are so confident about
their influence, why are they even talking about taking control rather than
just doing it?" says one foreign oil executive in Russia.
But many are betting the state will assert more control, preferring to
allocate multi-nationals minority stakes or the prospect of joint ventures.
It is no surprise investors have been selling shares in Yukos and other
privately run oil groups in favour of Gazprom, Transneft and other natural
resource groups closer to the state. Morgan Stanley's plan, Page 26
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