Stepping on the Gas
The Russian government has received a great deal of criticism in the last decade over the slow pace of its political reforms and its reluctant embrace of free-markets. That said, the Russians do have their fans, however, principally in the capital markets of the West and the energy markets of the East. With regard to the former, the Russian state oil firm Rosneft is on its way to a highly successful intial public offering:
Russian state oil firm Rosneft has priced its IPO at $7.55 a share, a source close to the placement told Reuters on Friday. The source said an official announcement was due later on Friday. The pricing gives Russia's No. 3 oil firm a market capitalisation of slightly under $77 billion, a premium to its local benchmark and No. 1 producer Lukoil.
The IPO has not been without its share of controversy however:
The flotation of Russia’s state oil company on the London Stock Exchange was last night heading into an unprecedented legal storm when a request was made to the High Court for an interim injunction to stop the listing of Rosneft’s shares. Yukos, the beleaguered oil company whose principal asset is now owned by Rosneft, has made an application for judicial review to challenge the listing and an interim order that could, if it were granted, prevent the start of trading of billions of dollars in Rosneft stock at the end of next week.
Here's how Rosneft came to own Yukos' "principal asset" and make it beleaguered:
YUKOS has threatened a lifetime of litigation after its key unit Yugansk was seized and sold at a forced state auction to pay for over $33 billion of back-taxes, a move many people saw as politically motivated. YUKOS founder Mikhail Khodorkovsky is serving an eight-year jail sentence in a Siberian penal colony for tax evasion and fraud. Rosneft bought Yugansk in 2004.
According to the Sunday Times (UK), Yukos is trying to turn the tables on Rosneft by alleging some potential for misdeeds on its part:
Yukos is likely to argue that the (Financial Services Authority, which considers the fitness of companies for admission to the Official List of the London Stock Exchange) has failed to consider that trading in Rosneft stock could carry the risk of money-laundering. A High Court judge is expected to decide today whether it will hear the application, following which the court will then decide whether to grant the interim injunction pending its judicial review of the listing.
As serious of a concern as the risk of money-laundering may be, Russia's friends in the East are not not deterred
China National Petroleum Corp (CNPC) has placed an order for $3 billion worth of shares in the IPO of Rosneft to deepen ties with the Russian oil giant, a source close to the deal said on Thursday.
Interestingly, the penalties in China for corruption like money laundering and tax evasion are much tougher, including as they dothe death penalty.
Technorati Tags: yukos | rosneft | cnpc
See also: Baron Bodissey of "The Gates of Vienna" has an excellent post on a planned pipeline from Iran, through Turkey and into the heart of the EU. He wonders whether- no, he actually predicts that- Turkey will use the pipeline as leverage in it's negotiations to join the EU. What the Gates post and this one have in common is oil's large and increasing role in geopolitics. It also underscores that oil or access to it is, in effect, a get out of "jail free card"; it means never having to say you are sorry; it means being to advocate genocide or not, as in the case of Turkey, not having to apologize for it.
Comments
Starling --
Is it true that no fully totalitarian economy has privatized successfully?
I know that Britain, Chile and Israel (the latter massively socialized) privatized fairly successfully. I know that Russia and the other components of the USSR did not. What about Poland, etc. -- how do they fare?
Posted by: Baron Bodissey | July 15, 2006 2:15 AM