Is the Slavneft Sale Russia’s Most Expensive Privatization Deal?

Yeltsin’s family consolidates resources of the country for future presidential elections

Pre-election redistribution of property is gaining steam in Russia. Supporters of the so-called Yeltsin family are obviously making a resolute attack on President Putin’s St. Petersburg team. Indeed, the chairman of Russia’s RAO UES, Anatoly Chubais worked hard for the laws on energy system reforming to be passed by the State Duma. Now, when the laws have been adopted, the energy industry practically fell under control of Yeltsin’s clan. A member of the Putin Administration , Russia’s Minister for Economic Development and Trade German Gref helped Anatoly Chubais in promoting the laws, he now looks rather ridiculous.

Russian oligarch, “the chief purse” of the family, Chukotka governor Roman Abramovich gained control of the Moscow fuel market and currently is as close to purchasing Slavneft oil company as ever before. The company actually droped into his lap: Prime Minister Mikhail Kasyuanov, who got his wonderful career boost due to the family, signed a decree which privatized 74.95 percent of Slavneft shares to a single shareholding.

The decree concerning Slavneft privatization was developed rather quickly, practically within 24 hours. Lobbyists of the project, the Ministry of Property, Ministry of Energy and Russia’s Foundation of Federal Property submitted the privatization document to the government and it was signed the next morning. It was unbelievably quick, taking Russia’s habitual bureaucracy into consideration.

The language of officialdom calls it “a well developed document.” As it goes from the logic of Kasyanov’s resolution, results of the auction should be summed up in December, and money received from the deal are to be transferred to the budget not later than February 15. According to the resolution Slavneft can’t be sold for less than 1.3 billion USD. Financial analysts say that privatization of Slavneft, a really tasty bit of the Russian oil industry, will yield not less than 2 billion USD to the government. Until now, the scandalous sale of 25 percent of Svyazinvest shares was considered the most expensive privatization deal and the government earned 1.8 billion USD then.

But the majority of Russian oligarchs felt offended, which gave rise to an incredible war of “everybody against all” resulting in the 1998 default. No doubt, Roman Abramovich is really very eager to get Slavneft and there is every chance that he will have it. The oil company is currently run by Yury Sukhanov, a former top manager of Sibneft. Sibneft is Slavneft’s minority shareholder. As it turned out, other large companies in the Russian oil market such as Tyumen Oil Company (TNK), LUKOIL, Yukos and Surgutneftegaz also have serious intentions to take part in the auction of Slavneft shares.

Analysts say that TNK is unlikely to be a success, as its debt liabilities currently make up over 1 billion USD. It may try to form an alliance with Sibneft as its minority shareholder, or with British Petroleum, and participate in the auction. However, TNK is less desirable for Roman Abramovich and he won’t like it to participate in the auction. But British Petroleum isn’t eager to increase its presence in Russia after suffering considerable losses in the Russian oil market. LUKOIL has recently experienced several failures in the foreign as well as in the domestic markets. It is not clear whether it will try its luck at the auction at all. As for Yukos, purchase of Slavneft would strengthen expansion of the company and increase its investment attractiveness for foreign partners. But oligarchs shouldn’t be mistaken as the government and the Prime Minister made all possible efforts for the family’s chief financier Roman Abramovich to get Slavneft. This is not because of the present-day situation in Russia. As a matter of fact, oligarchs and government officials rushed to realize the objective set for them: the maximum of Russia’s resources should be re-concentrated under the family’s control before the next presidential election campaign. This is to be done so President Putin can give thanks to those whom allow him a second presidential term. But, if Vladimir Putin is extremely obstinate, grand Mikhail Kasyanov who is very popular among Russian women, may become his rival at the presidential elections. And there, consolidated resources of the country will be his weighty advantage. Dmitry Slobodanuk PRAVDA.Ru

Translated by Maria Gousseva