Chinese firm may get 20% of former Yukos asset

A Chinese firm could take one-fifth of the state-owned Russian company that will control the former jewel in the crown of the Yukos energy giant.

Government-owned oil firm Rosneft took control of Yuganskneftegaz after it was sold to help cover $27 billion (€19.8 billion) in taxes that prosecutors say Yukos failed to pay.

But Mr Viktor Khristenko, Russia's industry and energy minister, said yesterday that the unit, which pumped 60 per cent of Yukos' output, would not be part of next year's merger between Rosneft and Gazprom, a huge state-controlled gas company.

"The assets of Yuganskneftegaz will be transferred to a separate company, which will be 100 per cent state owned. Up to 20 per cent of this company could be offered to CNPC," said Mr Khristenko, referring to the China National Petroleum Corporation controlled by the Beijing government.

"Yuganskneftegaz will not be among the assets to be consolidated, primarily because the state - as Gazprom's main shareholder - does not intend to increase its direct participation beyond a controlling interest," Mr Khristenko added.

Yukos' shareholders, who say the auction was illegal, have threatened to sue the eventual owners of Yuganskneftegaz and any banks that advised on the deal. A court in Houston, Texas, barred the sale of Yukos's assets, but failed to stop the auction going ahead.

Analysts see yesterday's move as a way of keeping Yuganskneftegaz in state hands while averting legal hazards for Gazprom and Rosneft in their global operations.

"The main incentive behind this move is to protect both Gazprom and Rosneft from legal risks," said Mr Steven Dashevsky, oil analyst at Aton brokerage, adding it was unclear how Yuganskneftegaz could become a separate entity if Rosneft had already bought it.

"The sale of a stake to a foreign partner could also partly help Russia legitimise the nationalisation of Yugansk in the eyes of the international community."

President Vladimir Putin has rejected allegations that the legal onslaught against Yukos is intended to crush the empire of its founder - billionaire Kremlin critic Mr Mikhail Khodorkovsky - and bring its best assets back into government hands, more than a decade after they were privatised as part of a deeply corrupt sale of state assets.

Deputy US State Department spokesman Mr Adam Ereli said last week that the dismemberment of Yukos "raises serious concerns about the rule of law as applied in Russia and the way that justice is perhaps politically or selectively applied".

Mr Andrei Illarionov, an outspoken economic adviser to Mr Putin, elaborated yesterday on recent remarks that the sale of Yuganskneftegaz was the "scam of the year".

"These actions have inflicted a colossal damage on the country," he said.

"They were conducted in a monstrously incompetent way, and it was clear to everyone that the only reason behind it was a huge desire to expropriate private property."