Rosneft Gets Bruised by Yukos
The once-small state-owned oil company Rosneft, which overnight rocketed itself into the role of a global oil player and Russia's biggest producer, is finding that the problematic nature of its acquisition of Yukos assets is hard to shake off.
The latest inconvenient news this week was that the former shareholders of Yukos has secured injunctions in the United States and United Kingdom, stemming from a Dutch court ruling related to uncollected debt in the amount of $380 million.
The ongoing legal saga of Yukos vs. Rosneft, which also has a case getting underway in the ECHR, has helped to shed greater light upon trial against Mikhail Khodorkovsky and Platon Lebedev, and creating a mounting consensus in the international community that the state-owned oil giant obtained its assets by fraudulent means. On the surface, the news has had some damage: on Wednesday Rosneft shares slid another 1.7% (against a market uptick as well as OPEC gains), while the possibility of frozen payments to Rosneft from the UK and USA could drain up to 7% of company revenue, which some observers say is creating a potential export deadlock as the company may not be able to fulfill their supply contracts.
Bill Browder, who has seen his own fair share of business harassment and fraud from the Russian government, gave an interview to The Daily Telegraph to comment on these latest developments: "If the injunction is successful and they are able to freeze cash, either Rosneft will have to pay it [the $389m debt] or face having payments impounded around the world. Yukos have acquired a huge weapon in their war against Rosneft... The wheels of justice move slowly but they do move and as time goes on Russia is having increasing problems around the world. The significance of this is that Russia has to behave or there will be real consequences."
However, no one should put on their party hats quite yet. Yukos may have succeeded in freezing about $643 million worth of Rosneft assets in the United Kingdom, but given that the company's annual revenues well above $6 billion, the injunction doesn't make quite a dent on the balance sheet. Other observers argue that Rosneft's corporate leadership has already "written off" the liabilities they may face from Yukos actions: "Rosneft has prepared itself well for its long drawn-out war of attrition with the remnants of Yukos, and the sanctions supposedly imposed would be near unenforceable anyway."
Regardless of the success or lack thereof in suing Rosneft for the theft of Yukos, there is a certain moral victory in seeing this news and the accompanying increasingly broad acceptance of the fact of the state's criminal actions. Every day there are fewer people willing to pretend that what happened in 2003 was normal and carried out according to the law, and whether or not the shareholders are compensated for this theft today, tomorrow, or years from now, there is an important validation of the basic claims made by Khodorkovsky in this second trial that the international community must carefully consider.
By James Kimer, Guest Commentator to the Khodorkovsky and Lebedev Communications Center