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BP’s Failure to Win Yukos Auction is No Surprise

Today’s news that the Russian state won the discount auction for Yukos’s nearly 10% stake in Rosneft comes as no surprise for anyone close to these proceedings. The final price was a paltry $7.6 billion – only $90 million above the opening price, and still 10% below the value of the stake. Even though on Friday, representatives of BP insisted that they would be seriously bidding after these assets with the intention of gaining a strategic foothold in Rosneft – yet they couldn’t be bothered to even offer market value? That just doesn’t add up, and contributes to the widely held assumption that BP’s participation was only smokescreen of formality to lend legitimacy to this rigged auction of stolen goods. Don’t worry though, of that $7.6 billion that Rosneft will apparently pay, you can bet that no money will actually change hands. Indeed, the bankruptcy supervisor himself, Eduard Regbun, has been nominated to Rosneft’s board of directors, and will stand to profit privately from his public role.

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From the AP:

Journalists and television crews crowded the company’s conference hall, formerly the venue for Yukos managers to tout the triumphs of what was Russia’s biggest oil producer. But the hall became the scene of its dismemberment, with footage of the first liquidation auction broadcast to plasma screens mounted on the walls. The process lasted just a few minutes: Four men in dark suits sat behind two tables covered with orange tablecloths. They raised their numbered paddles a total of 10 times. Number 2, RN-Razvitiye, bid last. Rosneft, which has borrowed US$22 billion (euro17 billion) from foreign banks for this and future auctions of Yukos assets, was widely expected to win. In a statement afterward, Rosneft said it would use the 9.44 percent stake it acquired as a “strategic currency” and could exchange the shares for oil assets in Russia and overseas.

From the IHT:

Few doubt that Rosneft will win. In Russia’s politically supercharged energy industry, any other company wanting to bid would need a nod from the Kremlin first. That explains why BP’s entry into the auction got a jaundiced reception from government critics. By Russian law, there must be at least two parties to an auction, and until BP entered the fray last week there was only Rosneft. Just on Friday, the chief executive of BP, John Browne, and his designated successor at the company, Tony Hayward, met with Putin. A spokesman for BP, Robert Wine, said Monday that the meetings had been intended for Browne to introduce Hayward to Russian officials. He said that he could not say whether the auction Tuesday was on the agenda. On a recent excursion to Nefteyugansk that was organized by the company, Rosneft executives defended their management of the asset and the role of the state in business generally. “We try to make sure our shareholders get the best dividends and value,” Sergei Kudryashov, Rosneft’s first vice president, said. “There is no difference between us and any private companies, like BP or Exxon.”