Russian oil stock offered for release of 3

Government would gain control of giant Yukos if it freed imprisoned ex-CEO

February 17, 2004|By NEW YORK TIMES NEWS SERVICE

MOSCOW - Major shareholders in the Russian oil giant Yukos offered yesterday to cede control of the company in exchange for the release from jail of Mikhail B. Khodorkovsky, Yukos' former chief executive and Russia's richest man.

Prosecutors immediately dismissed the proposal as "absurd from both a legal and a moral point of view," the Interfax news agency reported.

But it is the first public sign of bargaining between the oil company's major owners and the government, and it could lift the uncertainty clouding the Russian investment climate.

A Yukos shareholder, Leonid Nevzlin, said he and other major shareholders - including Khodorkovsky - are prepared to transfer their $14 billion controlling stake in Yukos to the state.

"This is not a deal or a ransom," he said in an interview from Israel. "The government doesn't want us to be shareholders, so we're leaving. We say, `Let's come to an agreement, and let's do it legally.'"

In exchange, Nevzlin said, the shareholders seek the release of three men: Khodorkovsky; Platon Lebedev, another large shareholder and business associate; and Aleksei Pichugin, the former director of Yukos' security service.

Nevzlin said that any agreement would probably not come until after the presidential election, March 14, and that Khodorkovsky wanted to remain in Russia if he were freed.

"He loves and believes in his country," Nevzlin said. "He wants to be free."

Khodorkovsky was arrested Oct. 25 and has been held ever since, awaiting trial on charges that include tax evasion and fraud. His arrest and those of several of his partners are widely viewed as a Kremlin-backed campaign against him.

It is unclear exactly how the Yukos shareholder group, which owns its stake through a holding company called Group Menatep, would surrender the 44 percent stake.

At current prices, their shares are worth $14 billion and the entire company is worth about $32 billion.

The proposal, first reported by Bloomberg News, could involve a straight give-back to the Russian state or perhaps a sale to a third party, such as a foreign oil company. ExxonMobil is reportedly interested in increasing its reserves by buying a controlling stake in a Russian oil producer.

But the offer hints at an end to the standoff between the Kremlin and Yukos, one of Russia's largest producers of crude oil. The conflict has put pressure on financial markets and given the West pause over Russia's transition toward capitalism.

"They've now moved to establish the basis for a deal," said Christopher Weafer, chief strategist with Alfa Bank in Moscow. "The Russian government wants this to end too, since the whole affair continues to show the risks of doing business in Russia."

The jailing of the Yukos billionaire has been very popular with Russia's impoverished rank-and-file voters. In part because of his crackdown on the country's oligarchs, President Vladimir V. Putin is widely expected to win re-election easily.

Putin has said little about the case. A deal like the one proposed might seem an admission that the prosecution was politically motivated, noted Christopher Granville, political strategist at United Financial Group, an investment bank.

"So the most likely prospect," he said, "remains due process - with attendant uncertainty - grinding on for months."

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