Gazprom Continues its Italian Shell Games to Steal Yukos

scaroni092209.jpgTwo interesting pieces of news coincide today from the sordid world of Russian energy politics.  First, permissions to build the 403-meter “Gazscraper” tower in St. Petersburg were muscled through local government by Valentina Matvienko over the protests of preservationists, while hours later news came down that Italian firms Eni and Enel had finalized the sale of $1.6 billion worth of former Yukos assets back to Gazprom, which it had originally acquired in a controversial rigged auction.

Back when the auctions of Yukos assets were taking place (which wasillegal in the first place under Russian bankruptcy law, which callsfor non-core assets to be sold first), it was alleged that the lack offoreign participation by oil majors and non-Russian state-ownedcompanies was due to the fact that the due diligence didn’t add up -that these assets had bad title and would become the subject of futurelitigation.  This lacking credibility led the Kremlin to rope inseveral high-level foreign energy companies to act as stand-ins, eitherpretending to bid on assets that they clearly wouldn’t win, or actuallyacquire properties which would then later be resold back to thegovernment, who had rightfully stolen it in the first place. 

That’swhat we saw in the past – though Eni claimed to have plans to keeppossession of their Gazpromneft stake (laughable), and that’s whatwe’re seeing today with SeverEnergia, as the Italians passed thatcritical 51% control of the business over to the state.  (Have you everwondered how it is that Russia ends up owning just 51% of so manyenergy companies?)  BP experienced similar entrapments to get proximityto power and greater safety from expropriation for its investments in places like Kovykta, and was cornered into a $1 billion investment in Rosneft before the IPO.

The plans for Gazprom’s eyesore, which has been comparedto the misguided “Ulbricht’s Needle,” will likely cost the greathistoric Russian city its World Heritage Site status from UNESCO.  Thetransactions with the Italian companies provides a barefaced admissionof what we saw coming from the similar “asset laundering“operation by major Western companies:  that the state’s destruction ofYukos, imprisonment of Mikhail Khodorkovsky, and subsequent theft ofthe company to enrich the very people who originally engineered theshow trial will no longer be hidden or spun as anything less than whatit is.

To see both Putin’s Needle go forward against the will ofSt. Petersburgers as well as the Italian participation in a massivetheft of property, well, it’s a real double poke in the eye. Notwithstanding the progress which could be made in the latest Yukos suit filed in New York against Rosneft, or the implications outlined in a public letterI signed to shareholders of Gazprom, Rosneft, Eni, and Enel, it is apity that not a greater level of political attention is garnered inEurope over these open violations of law.

Photo: Russian Prime Minister Vladimir Putin (2nd L) and Gazpromchief executive Alexei Miller (L) listen to Italian energy mayor ENI’schief executive Paolo Scaroni in the Novo-Ogaryovo residence outsideMoscow January 15, 2009.  (Reuters Pictures)