Sun, Dec 12, 2004 page12

• Two companies will join Yukos bidding process

  WINDOW DRESSING? Although the assets of the troubled Russian oil firm will likely go to state giant Gazprom, two other firms will now join the auction

  • NY TIMES NEWS SERVICE
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  Russian regulators said on Friday that two more companies would bid for the prize assets of the Russian oil giant Yukos on Dec. 19, joining Gazprom, the state energy behemoth, which is still widely expected to win the auction.

  Russia's Federal Antimonopoly Service said on Friday that two companies, Intercom and the First Venture Co., had submitted bids for 76.79 percent of Yuganskneftegas, Yukos' top-producing subsidiary, which pumps about 1 million barrels of oil a day. The starting price for Yuganskneftegas is 246 billion rubles, or about US$8.75 billion.

  The Federal Antimonopoly Service gave no details about the two new contenders, but a minimum of two bids are required to make the auction valid.

  "All applications will be considered before the auction," the agency said.

  A receptionist who answered the phone at Intercom Holding, a company based in Moscow that has submitted bids for large construction projects here, like the reconstruction of Russia's Sheremetyevo airport, said no one was available to comment. Whether Intercom was the same company bidding for Yuganskneftegas was unclear, though Intercom's business also includes selling oil and gas. The other company, First Venture, could not be located.

  Industry analysts were skeptical of the two new bids.

  "It's very possible that these are just dummy companies submitting dummy bids," said Paul Collison, oil and gas analyst at Brunswick UBS, a brokerage firm and investment bank here. Or it is possible that two foreign investors like the China National Petroleum Co. or the state oil company of India, the Oil and Natural Gas Corp., could submit friendly bids to make the auction look competitive, in exchange for better treatment in other business deals, he said. Both companies have said they want to bid.

  Gazprom is expected to win Yuganskneftegas and is likely to combine other oil and gas assets into a new Kremlin-backed state energy giant. As part of a broader attack against Yukos and its founder, Mikhail B. Khodorkovsky, tax claims of more than US$26.6 billion against Yukos prompted the government to sell off Yuganskneftegas.

  Yukos responded to news of the two bidders by calling the auction "inappropriate and illegal," said Claire Davidson, a spokesman for Yukos who is based in London.

  "The management believes there should be no sale or auction," she said. The dismemberment of Yukos for back taxes, and a new tax claim this week against VimpelCom, a widely held company listed on the New York Stock Exchange, have prompted fears among foreign investors that the use of unexpected, aggressive audits, which produced tax claims at both companies, may be growing.

  On Tuesday, ExxonMobil's chief executive, Lee R. Raymond, said in a television interview that he was re-evaluating investments in Russia. Raymond said the government's actions against Yukos raised questions "about how they are going to manage their natural resources."

  "Until some clarity comes to that, I think it's going to be pretty difficult for people to think about putting large sums of money in as an investment," Raymond said.

  "The sense of this place is that it is turning into a banana republic," Collison said. "That is not where institutional investors thought Russia was headed. They made a bet on Russia being an emerging market going in the direction of a developed market. Instead, the disappointment is exactly what Raymond said, in the policy-making."

  Uncertainty and lack of Kremlin action on the business environment -- including the opening of banking to foreign companies and reducing inflation -- are rattling the Russian markets. The RTS index, the benchmark for the Russian stock market, has dropped more than 10 percent in just two days.
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