Russia to nationalize natural resources
October 31, 2003 Posted: 19:17 Moscow time (15:17 GMT)
MOSCOW - The Russian government and media have been at pains to explain the relentless judiciary attack on the oil company YUKOS, which culminated Thursday with the freezing of the controlling stake in the country's largest oil producer, the Wall Street Journal reports. The semi-official version is that Mr. Khodorkovsky, Russia's richest man and YUKOS’ largest shareholder, has mostly himself to blame for his troubles. After all, he started to meddle in politics, supporting various opposition groups and breaking an implicit agreement between Russian oligarchs and President Vladimir Putin, according to the newspaper.
It is the election season in Russia, with the parliamentary election coming in December and the presidential vote scheduled for next March. Arresting a highly visible oligarch and stripping him of his oil company plays well with the Russian public, who have not yet gotten rid of the Soviet-era notion that business is synonymous with thievery, the WSJ reports.
However, the true reasons behind the attack on Mr. Khodorkovsky are more complicated as well as more sinister. They go to the core of what kind of society post-Soviet Russia has become, and who is the master in the land, the newspaper says.
According to it, Russia is a rentier state, which lives off the extraction and sale of its oil, gas, metals and other natural resources. Although Soviet-era industrial plants are producing once more, an appreciating ruble is starting to expose their lack of international competitiveness - highlighted this week by the World Economic Forum report that shows Russia dropping to 70th place (from 64th) in its business competitiveness ranking. The old edge in science and technology is gone, as top-level researchers have left the country. Even Russia's armaments industry cannot hold on to its markets. Russian military hardware has to be upgraded with Western European and Israeli electronics to find clients even in the developing world.
Raw materials are thus Russia's only niche in the world economy. And, just as its 1998 default was largely the result of low oil prices, so its current bout of prosperity stems from high oil prices prevailing over the past few years. There are different ways to divvy up the natural rent that accrues to nations fortunate enough to have natural resources on their sovereign territory. Norway and Alaska spread their oil revenues liberally among their citizens in a system that suspiciously resembles socialism. Saudi Arabia, meanwhile, exemplifies the feudal stage in history: its oil wealth belongs to the House of Saud, whence it trickles down to its sundry vassals.
In Russia, many ordinary people believe that the natural rent is distributed unfairly. In their view, it goes to a handful of oligarchs, who fraudulently bought up natural resource companies in the early 1990s. This is why attacks on oligarchs are so popular. However, while the oligarchs are obviously wealthy, they are not the main recipients of Russia's natural rent. The bulk of oil and gas revenues go to Russia's extensive government bureaucracy.
In Russia, the old Soviet-era bureaucracy not only remains in place, but it has been the main beneficiary of the economic reforms of the past decade. It expanded by nearly 15 percent in the second half of the 1990s, even as the overall population declined. The number of employees at various government agencies now totals some one-tenth of the population.
Mikhail Khodorkovsky became an integral cog in this corrupt machinery. For over a decade, every Russian oligarch has been feeding a small army of officials - all those who issued permits to set up private banks in the early years of reforms, signed off on cheap government loans and sold off resource companies for a fraction of their actual worth. But once Mr. Khodorkovsky learned more about business, he and the bureaucrats parted ways. Milking the cash flow at YUKOS may be lucrative, but it doesn't create true wealth, whereas by making his company honest and transparent an oligarch can realize billions on the stock market. At the same time, transparency and accountability precludes slush funds for paying protection and grease money to officials.
A genuinely transparent company can only exist in a transparent society. So, Mr. Khodorkovsky soon found himself funding various causes that promoted openness in society at large. That was something the New Class certainly could not tolerate, the WSJ says. There is a larger issue at play here, too. The experience of other countries where natural rent accrues to state officials - such as Venezuela and Mexico - suggests that it is far easier for bureaucrats to lay their hands on the money if natural resources belong to them - i.e., to the state. Vladimir Putin has sought to reassure other oligarchs, domestic public opinion and Western investors by stating that the early 1990s privatization will not be rolled back. This is probably true, but what he meant was that those reforms that allowed private ownership in the industrial and retail sectors are safe.
On the other hand, it now seems a foregone conclusion that oil, metals and other natural resources will be re-nationalized in the coming years - just as YUKOS suffered a de-facto nationalization Thursday. The pattern has already been tried out, over the past two years, on two disgraced oligarchs, Boris Berezovsky and Mikhail Gusinsky. After YUKOS, the rest of the natural resource companies will be picked of one by one, and in each case the target of the expropriation will be punished for some transgression, real or imagined.
Russia vai nacionalizar seus recursos naturais
Moderador: Conselho de Moderação
Concern mounts over Russia crisis
The US and German governments have raised serious concerns over the way Russia has handled the investigation into alleged tax fraud at the country's largest oil company, Yukos.
They have asked for assurances over the legality of the arrest a week ago of the Yukos chief, Mikhail Khodorkovsky.
The US State Department spokesman, Richard Boucher, said Moscow needed to dispel concerns that the case against Mr Khodorkovsky was politically motivated.
Mr Khodorkovsky, believed to be Russia's richest man, has been providing financial help to liberal opposition groups in Russia.
Correspondents say it is widely assumed that is why President Vladimir Putin's government has taken legal action against him.
A spokesman for German Chancellor Gerhard Schroeder said legal certainty was essential if Russia was to continue its integration into the world economy.
Germany is Russia's largest trading partner and an important source of much needed foreign investment.
Foreign advisers to Yukos had said on Friday that they would be lobbying Western governments on the firm's behalf.
PM 'concerned'
On Thursday, Russian prosecutors froze almost half the shares in Yukos, though the freeze on some of those shares was lifted the following day.
Russia's stock market has lost almost 15% of its value over the past week.
Analysts say Mr Khodorkovsky's funding of opposition groups broke a tacit agreement to stay out of politics in return for avoiding investigation of his financial affairs.
The head of the Russian parliament's budget committee, Alexander Zhukov, told the BBC on Saturday that, while he was bothered by the Yukos affair, it was unlikely to lead to any wider investigation of Russian businesses.
"The president has already answered that... most likely this will be the only case," he told BBC Radio 4's Today programme.
"It's not going to open up the door to everything."
But on Friday, Prime Minister Mikhail Kasyanov broke ranks with the Kremlin by saying he was "deeply concerned" by events.
His comments come amid speculation that the prime minister's position may ultimately be under threat.
Mr Kasyanov is a veteran of Russian politics, having risen to power under former President Boris Yeltsin in the climate that saw Yukos and other lucrative assets privatised in murky circumstances.
Mr Putin's chief of staff Alexander Voloshin, a fellow Yeltsin-era appointee, was replaced on Thursday amid reports that he was angry at the judicial campaign against Yukos.
The BBC's Ian MacWilliam says Mr Putin has sought to play down fears that the case heralds a wider campaign against the so-called oligarchs - the small group of super-rich businessmen who grabbed control of the country's most profitable industries during the privatisation of the 1990s.
But some analysts say the events surrounding Yukos have created the biggest political and economic crisis of Mr Putin's three years in office.
Investors are reassessing Mr Putin's credentials as manager of one of the world's biggest emerging economies, while political commentators are interpreting the action as a drive by Kremlin hardliners to suppress political dissent.
"He's gone pretty far in tarnishing his reputation," said Andrew Kuchins, director of the Carnegie Moscow Centre think-tank.
"It's not beyond the realm of possibility that he turns this around, but it will take a huge stroke of leadership to repair the damage."
Trading
Russian prosecutors on Friday lifted the freeze on some of the blocked shares.
The unfrozen shares - amounting to about 2% of Yukos, or 4.5% of the 44% that was earlier frozen - are said by prosecutors to belong to individuals unrelated to the fraud and tax evasion case against Mr Khodorkovsky and key allies.
Trading in Yukos shares remained volatile, while the wider stock market and the rouble steadied.
Yukos shares closed 7.5% higher on Friday, clawing back some of Thursday's losses.
The US and German governments have raised serious concerns over the way Russia has handled the investigation into alleged tax fraud at the country's largest oil company, Yukos.
They have asked for assurances over the legality of the arrest a week ago of the Yukos chief, Mikhail Khodorkovsky.
The US State Department spokesman, Richard Boucher, said Moscow needed to dispel concerns that the case against Mr Khodorkovsky was politically motivated.
Mr Khodorkovsky, believed to be Russia's richest man, has been providing financial help to liberal opposition groups in Russia.
Correspondents say it is widely assumed that is why President Vladimir Putin's government has taken legal action against him.
A spokesman for German Chancellor Gerhard Schroeder said legal certainty was essential if Russia was to continue its integration into the world economy.
Germany is Russia's largest trading partner and an important source of much needed foreign investment.
Foreign advisers to Yukos had said on Friday that they would be lobbying Western governments on the firm's behalf.
PM 'concerned'
On Thursday, Russian prosecutors froze almost half the shares in Yukos, though the freeze on some of those shares was lifted the following day.
Russia's stock market has lost almost 15% of its value over the past week.
Analysts say Mr Khodorkovsky's funding of opposition groups broke a tacit agreement to stay out of politics in return for avoiding investigation of his financial affairs.
The head of the Russian parliament's budget committee, Alexander Zhukov, told the BBC on Saturday that, while he was bothered by the Yukos affair, it was unlikely to lead to any wider investigation of Russian businesses.
"The president has already answered that... most likely this will be the only case," he told BBC Radio 4's Today programme.
"It's not going to open up the door to everything."
But on Friday, Prime Minister Mikhail Kasyanov broke ranks with the Kremlin by saying he was "deeply concerned" by events.
His comments come amid speculation that the prime minister's position may ultimately be under threat.
Mr Kasyanov is a veteran of Russian politics, having risen to power under former President Boris Yeltsin in the climate that saw Yukos and other lucrative assets privatised in murky circumstances.
Mr Putin's chief of staff Alexander Voloshin, a fellow Yeltsin-era appointee, was replaced on Thursday amid reports that he was angry at the judicial campaign against Yukos.
The BBC's Ian MacWilliam says Mr Putin has sought to play down fears that the case heralds a wider campaign against the so-called oligarchs - the small group of super-rich businessmen who grabbed control of the country's most profitable industries during the privatisation of the 1990s.
But some analysts say the events surrounding Yukos have created the biggest political and economic crisis of Mr Putin's three years in office.
Investors are reassessing Mr Putin's credentials as manager of one of the world's biggest emerging economies, while political commentators are interpreting the action as a drive by Kremlin hardliners to suppress political dissent.
"He's gone pretty far in tarnishing his reputation," said Andrew Kuchins, director of the Carnegie Moscow Centre think-tank.
"It's not beyond the realm of possibility that he turns this around, but it will take a huge stroke of leadership to repair the damage."
Trading
Russian prosecutors on Friday lifted the freeze on some of the blocked shares.
The unfrozen shares - amounting to about 2% of Yukos, or 4.5% of the 44% that was earlier frozen - are said by prosecutors to belong to individuals unrelated to the fraud and tax evasion case against Mr Khodorkovsky and key allies.
Trading in Yukos shares remained volatile, while the wider stock market and the rouble steadied.
Yukos shares closed 7.5% higher on Friday, clawing back some of Thursday's losses.
Exxon, Chevron suspend talks with YUKOS
October 27, 2003 Posted: 16:36 Moscow time (12:36 GMT)
MOSCOW - Merger talks between YUKOS and the US-based oil companies ExxonMobil and ChevronTexaco have been temporarily suspended until the fate of Mikhail Khodorkovsky, the head of YUKOS who was arrested this weekend, becomes clearer, the Financial Times reports citing sources close to the talks.
At the same time, the newspaper notes that both US companies are still interested in acquiring a stake in Russia’s largest oil company. A source close to the deal said it would be signed, the only question was when. Negotiations with Chevron, the smaller of the two American oil groups, are believed to be more advanced than Exxon's. People familiar with the talks said Chevron was seeking to forge a partnership structure with YUKOS. The US company is also considering asset swaps as a way of gaining entry to the region's oil and gas reserves. For its part, Exxon is understood to want greater control in any merger, and is looking to take a stake of up to 40 percent in YUKOS. If YUKOS sells a significant stake, the deal could amount to the biggest foreign investment deal in Russia, the newspaper says. But a swift agreement is unlikely while Mr. Khodorkovsky remains in custody, it adds.
However, Russian analysts think that the negotiations between YUKOS and the two US-based oil companies on the sale of a large stake in YUKOSSibneft will resume once YUKOS’ political problems are settled. According to Sergey Suverov, analyst at the Zenit bank, when the companies agree on the sale, the deal will have to be approved by Russian President Vladimir Putin. In Mr. Suverov’s opinion, the political situation around YUKOS will not have any significant impact on the price of a stake in YUKOSSibneft (in case it will be sold). “YUKOS’s activities are based not on politics but on the economy, and, from this point of view, the company is OK,” the analyst stressed.
On Saturday, October 25, the Basmanny Court of Moscow issued an arrest warrant for Mikhail Khodorkovsky. He was detained on the same say in Novosibirsk and taken to Moscow for questioning.
In Moscow, the Prosecutor General’s Office charged Mr. Khodorkovsky with six counts. In particular, the businessman is accused of fraud (Article 159 of the Russian Criminal Code), non-compliance with a court judgment (Article 315), tax evasion (Articles 198 and 199), causing material damage by way of fraud and abuse of trust (Article 165) and document forgery (Article 327)
October 27, 2003 Posted: 16:36 Moscow time (12:36 GMT)
MOSCOW - Merger talks between YUKOS and the US-based oil companies ExxonMobil and ChevronTexaco have been temporarily suspended until the fate of Mikhail Khodorkovsky, the head of YUKOS who was arrested this weekend, becomes clearer, the Financial Times reports citing sources close to the talks.
At the same time, the newspaper notes that both US companies are still interested in acquiring a stake in Russia’s largest oil company. A source close to the deal said it would be signed, the only question was when. Negotiations with Chevron, the smaller of the two American oil groups, are believed to be more advanced than Exxon's. People familiar with the talks said Chevron was seeking to forge a partnership structure with YUKOS. The US company is also considering asset swaps as a way of gaining entry to the region's oil and gas reserves. For its part, Exxon is understood to want greater control in any merger, and is looking to take a stake of up to 40 percent in YUKOS. If YUKOS sells a significant stake, the deal could amount to the biggest foreign investment deal in Russia, the newspaper says. But a swift agreement is unlikely while Mr. Khodorkovsky remains in custody, it adds.
However, Russian analysts think that the negotiations between YUKOS and the two US-based oil companies on the sale of a large stake in YUKOSSibneft will resume once YUKOS’ political problems are settled. According to Sergey Suverov, analyst at the Zenit bank, when the companies agree on the sale, the deal will have to be approved by Russian President Vladimir Putin. In Mr. Suverov’s opinion, the political situation around YUKOS will not have any significant impact on the price of a stake in YUKOSSibneft (in case it will be sold). “YUKOS’s activities are based not on politics but on the economy, and, from this point of view, the company is OK,” the analyst stressed.
On Saturday, October 25, the Basmanny Court of Moscow issued an arrest warrant for Mikhail Khodorkovsky. He was detained on the same say in Novosibirsk and taken to Moscow for questioning.
In Moscow, the Prosecutor General’s Office charged Mr. Khodorkovsky with six counts. In particular, the businessman is accused of fraud (Article 159 of the Russian Criminal Code), non-compliance with a court judgment (Article 315), tax evasion (Articles 198 and 199), causing material damage by way of fraud and abuse of trust (Article 165) and document forgery (Article 327)