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Mon, Dec 27, 2004 - Page 12 News List

Chinese may get piece of Yukos

OPENING DOORS Russian President Vladimir Putin is engaging in an `energy dialogue' with Beijing, in what many experts see as an attempt to circumvent the US


Russian President Vladimir Putin has hinted at Chinese involvement in the exploitation of the confiscated assets of the Yukos chief oil producing unit, marking a shift in Moscow's traditional closed-door policy to its Asian neighbor.

"We do not exclude the possibility that China's CNPC energy company will take part in exploiting the auctioned assets" of Yukos, Putin said last week while visiting Germany.

He also revealed that Russia's state-controlled energy behemoth Gazprom, which is expected to eventually get control of the choice assets of a dismembered Yukos, had signed a cooperation memorandum to supply gas to China.

State petroleum company Rosneft last week bought the winner of an auction for Yukos's largest oil-pumping subsidiary, Yuganskneftegaz, expanding Moscow's control of the country's energy industry.

Rosneft is in the process of merging with state-run gas monopoly Gazprom to create a national oil and gas corporation.

Putin's remarks signal a shift in Moscow's earlier reticence toward Chinese efforts to access Russian natural resources.

In 2002, China's CNPC sought to take part in the privatization of Slavneft, Russia's eighth largest oil producer, but was forced to withdraw due to protests in Russian political circles.

"The United States and Europe are beginning to put pressure on Russia because of the Yuganskneftegaz auction and the roughshod way it was done. What Putin has said about China means `you are not the only ones, we have another partner, China,'" analyst Viktor Kremenyuk of the USA-Canada research institute said.

Mathew Thomas, an oil sector specialist in Alfa Bank, said the latest statements from the Russian president should be seen as part of an ongoing "energy dialogue" with China.

"Over the short term, I am not certain that the Chinese will chop off a piece of Yuganskneftegaz -- Putin's comments were rather vague ..." he said.

"But China needs oil, and in view of the Russo-Chinese energy dialogue I think it not impossible that CNPC could become a shareholder in a Russian oil producer."

The Interfax news agency Thursday quoted a Gazprom source saying that CNPC would make an "important announcement" regarding Gazprom on Dec. 30. It did not elaborate.

The world's second largest oil consumer after the US, China has shown a growing interest in Russian oil assets as its oil needs are expected to double by 2020.

Beijing "counted on boosting energy cooperation with Russia, most notably deliveries of Russian oil, however the Russian market develops," a Chinese foreign ministry spokesman said Wednesday, as quoted by the Russian Interfax news agency.

Until recently Yukos has been the sole Russian supplier to China, with deliveries equaling seven percent of the country's crude oil consumption.

Beijing has vigorously protested against the interruption of deliveries caused by Moscow's legal campaign against the beleaguered group over alleged fraud and unpaid taxes.

Last week's deal for Rosneft cemented Kremlin control of the strategic energy sector after almost 18 months of attacks on Yukos and its imprisoned billionaire founder, Mikhail Khodorkovsky.

Khodorkovsky built the privatized group into Russia's most Western-like company before he was arrested in October last year despite international protests about alleged political interference in the private sector.

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