Putin hints at China alliance for Yukos oil

December 21, 2004

Gazprom, Russia’s state-controlled gas monopoly, could team up with the China National Petroleum Corporation to develop the Yukos oil company’s main production asset, sold to a mystery bidder on Sunday.

Speaking in Germany, Vladimir Putin, the Russian president, said: “We don’t rule out that CNPC would take part in the production of Yuganskneftegas, which was sold at an auction.” He said CNPC did not participate in the auction. “However, Gazprom and CNPC have reached an agreement about co-operation in the energy sector.”

Immediately after Mr Putin’s statement, Gazprom said a new memorandum, signed two days before the auction, covered strategic co-operation with China in the oil sector – particularly over oil projects in Russia. It already has an agreement with CNPC over gas.

Gazprom said yesterday: “There is a real energy boom in Asia and particularly in China. In developing Gazprom . . . the eastern direction has been identified as a priority.”

Yegor Gaidar, Russia’s most prominent liberal economist and a former acting prime minister, said: “If one accepts that the government has any strategy in regard to Yukos, a joint venture with China signifies a long-term change of focus towards Asian markets.”

Mr Putin’s statement comes after an injunction by a US bankruptcy court blocking the sale of Yuganskneftegas and is likely to cause alarm in the US, which saw Russia as an alternative source of oil to the Middle East.

US companies, including ExxonMobil and Chevron Texaco, were negotiating with Yukos about a possible stake before the government launched its campaign against the company and arrested Mikhail Khodorkovsky, its former chief executive.

The US administration protested over Russia’s auction of Yugansk. Scott McClellan, White House spokesman, warned that it could harm foreign investment in Russia. “We are disappointed that Russia went ahead with the auction of the Yukos subsidiary,” he said. “We have communicated to the Russian government repeatedly that its handling of the Yukos matter could have a chilling effect on foreign investment in Russia and affect its role in the global economy.”

Mr Putin did not say who owned Baikal Finance Group, which last weekend bid $9.35bn (£4.85bn) for Yuganskneftegas. However, he said behind it stood a “group of individuals with experience in the oil sector”.

Vedomosti, the Financial Times’ sister paper, identified Baikal’s representatives at the auction as employees of Surgut neftegas, the cash-rich oil company that operates in the same region as Yugansk.

Although Mr Putin was careful not to mention Gazprom in relation to the auction, it is likely to end up the owner of most of Yugansk’s assets even if Surgut picks up some reward for its role, one person close to the sale said.

“It is clear that Gazprom’s interest in Yugansk will be realised,” the person said.

* Separately, Gazprom yesterday said it had sold Gazpromneft in a manoeuvre to avoid the US court injunction that prevented the holding company for its oil assets from taking part in the auction for Yugansk.


Tags: Fossil Fuels, Geopolitics & Military, Oil