Source Pravda.Ru

Four Minutes of National Disgrace - 18 December, 2002 - News

Slavneft: Collusion privatization

In forensic practice, a situation like today’s Slavneft privatization is usually qualified like “collusion.” In other words, it is a real deception. So, a state oil company is privatized. Spite all promises of the state to carry out an honest and open auction, the state again yield to the pressure of economical clans. While state bodies empowered to organize this auction in fact made their best to displace from the scene all real competitors of Sibneft and TNK companies. Slavneft was sold cheaply: only for 1,860 million dollars. Who has really lost, it is Russian state. It should have received at least 1,200 million dollars more. And, as well-know, if somebody loses, somebody else gains.

The state share holding of 74.95 percent was sent today for 1.86 billion dollars. This sum was paid by the limited liability company Investoil, affiliated with the Roman Abramovich company Sibneft, which acted in the interest of Tyumen Oil Company (TNK). Already in four minutes after opening, the auction was over. These four minutes are the real price of all Russian economical and political reforms, of so-called market economy. That are just words. In fact, that were four minutes of national disgrace. Such things are usually forgotten soon. And nobody would like to remember them.

Russian Government and Russian Fund of Federal Property many times promised that they would organize an unprecedentedly open and honest auction. They promised the press in the hall and broadcast of the auction. Nothing of the kind. The promised honesty and openness of the declaration were simply annihilated by intrigues and the interested parties pressure upon the functionaries. Experienced thanks to initial privatization, oligarchs like Khodorkovsky and Alekperov understood very well what would happen next. They simply went aside not to make themselves dirty, remembering about old proverb: Watch over your clothes while they are new, and over your honour while you are young. So, they watch over their honour, or at least over what is left of the honour.

The most ambitious privatization project of the year, Russian media concluded, was turned into a shameful show, into a frank swindle. And as everybody can swindle Russian state, the state was swindled boldly and openly. You can judge: the auction organization was simply disgusting. And this is right, if all auction participants are nervous, they most likely would make mistakes. The list of possible auction participants was many times changed, till the very last day. All State Duma deputies were necessary to make Chinese state company CNPC refuse from buying the share holding. Of course, the Chinese should have been informed, that they have no chance, according to Russian laws. They should have been hindered from making stupid statements. Though, why? Appearance of such solid competitor made the situation more acute and frightened away several real pretenders. While that one who was sure of getting everything, was rubbing his hands. Deputies honestly worked off the oligarchs idle promises. Yesterday, stock company Finance Profit Expert affiliated with the Sibneft most dangerous competitor, state company Rostneft, left the race track. At first, Russian Ministry of Anti-monopoly Policy reported there was no application of the company. Then, the company was informed it had been excluded from the auction. According to the Rosneft spokesman Alexandr Stepanenko, the company received a court ruling, which banned it to participate in the auction. Alexandr Stepanenko stressed the Finance Profit Expert had been ready to offer at least 2.5 billion dollars for the Slavneft share. Yesterday, the Rosneft spokesman assumed that as a result of state structures activities the budget hardly would receive a sum which is more than the starting one. And he was right. Moreover, today Alexei Kudrin, vice Prime Minister and finance minister of the Russian Government, said the state had not accounted for more.

While in early December, Russian Calculation Chamber concluded the Slavneft worth had been seriously underestimated. Even Russian Fund of Federal Property which fixed the initial price as 1.7 billion dollars bethought and ordered an independent expert examination. The experts concluded the recommended starting price of the share holding should be at least 2.5 billion dollars. While Calculation Chamber estimated the starting price as 3-3.2 billion.

Though, the main pretenders, the Sibneft and Tyumen Oil Company did not have this sum, spite both made efforts before the auction to borrow as much money as possible. Moreover, Sibneft did not intend to spend so much money. And, as it turned out, the Roman Abramovich company had all trump cards.

The state preferred to neglect its own profit and take care of the Roman Abramovich profit. State functionaries, with tears in their eyes, laid the company at Abramovich’s feet. You see, control over Slavneft will make Sibneft the fourth company in Russia as for extraction level. There are only three companies that are more cool: Lukoil, Yukos, and Surgutneftegaz. While as for market capitalization, according to Reuters, Sibneft could be even at third place. For, Slavneft belongs to the ten biggest oil companies of Russia and to the 50 biggest oil companies of the world. It possesses 20 oil deposits, Yaroslav refinery, oil-selling works all over Russia, and a solid share of Mozyr refinery in Byelorussia. And all this was bought for the sum, which is only 160 million dollars bigger, than the starting price and only within four minutes. Behind the closed doors.

Once, in Russia, a real war between oligarch groups took place, just because of unjust, from Russian oligarchs’ view, privatization of 20-percent share holding of the Svyazinvest company. This war provoked a crisis and the 1998 default and undermined – once and for all – the power of then-leader of the Russian President Administration, Anatoly Chubais and, practically, caused the Boris Yeltsin pre-term resignation. The war stopped only when oligarchs understood the country was going down. I wonder, who, ultimately, will pay for this privatization?

In the meanwhile, today’s situation is very similar to the Svyazinvest privatization. Of course, there is some difference: the economical situation in the country is better, oligarchs have learned finally to agree with each other, almost without shooting and black PR. While the main thing is, that the Russian authorities are not interested in rocking the boat. Somebody, certainly, is interested in it, who has left the Kremlin long ago. Though the Kremlin itself is not. The Kremlin needs stability. So, the state likely will prefer today to show that nothing has happened. As if nobody has taken out 1.2 billion dollars from the budget pocket. And when this sum will be necessary, the state certainly will bow to oligarchs and ask this sum to borrow, in exchange for a good piece of motherland. Both the state and oligarchs are already accustomed to it.

Kira Poznakhirko PRAVDA.Ru

Translated by Vera Solovieva

Read the original in Russian: http://economics.pravda.ru/economics/2002/7/21/63/4510_Slavneft.html