Wednesday, December 1, 2004
Gazprom may buy oil firms in Russia
Arkady Ostrovsky / Moscow December 01, 2004
Deutsche Bank has advised Gazprom, Russia's state-controlled gas monopoly, to buy several of the largest private domestic oil companies - a recommendation analysts say would take the Russian economy back to its Soviet past.
Deutsche Bank, hired by Gazprom to advise it on the strategic development of its oil business, suggested that the state monopoly should, in effect, renationalise the Russian oil industry by swallowing the main production asset of Yukos, the embattled oil company, as well as Si billioneft and Surgutneftegas, two privately owned groups.
Gazprom said Deutsche had also agreed to arrange financing for the purchase of Yuganskneftegas, the main production subsidiary of Yukos, which is being sold in a forced auction next month with a starting price of $8.6 billion.
The total cost of Deutsche's shopping list is estimated at $40 billion-$50 billion.
The sale of Yuganskneftegas is seen as part of the authorities' dismantling of Yukos and is shrouded in potential legal problems.
The bank's readiness to participate in the sale of a legally disputed asset and its advice to buy a large part of the Russian oil business has been criticised by investors and analysts.
Ivan Mazalov, a fund manager at Prosperity Capital Management, a Swedish-owned investment fund, said: "It is one of the most harmful recommendations for Russia one could make.
If Gazprom follows this advice, it would be a step back towards the Soviet state-controlled economy."
Deutsche Bank's advice, however, is in keeping with growing state control in Russia over the economy.
Valery Draganov, head of the parliamentary committee for economic policy and a member of the pro-Kremlin United Russia party, welcomed Deutsche's recommendations and said it reflected the general strategy of the Russian government. "Today there is consensus that natural resources must be controlled by the state and managed for the good of the whole country."
Sergei Bogdanchikov, head of Rosneft state oil company, which is being merged with Gazprom, acknowledged receiving the letter signed by Nicholas Jordan, vice-president of Deutsche Bank.
A spokesman for the company said: "Gazpromneft [oil arm of Gazprom] must become a large oil company on the international scale with a significant resource base in order to compete on the global energy market. The recommendations of Deutsche Bank will be thoroughly studied."
Steven Dashevsky, oil and gas analyst at Aton Capital, said: "Two years ago, such a letter from a bank would have sounded like a hoax. Today it is part of Russia's political reality.
The Kremlin wants to control natural resources in the country and Deutsche Bank wants to march in the avant-garde of the new state ideology."