Oligarch? I wish

Nov 13, 2003 01:00 AM

by Terry Macalister

Simon Kukes hit London to persuade the world that the new CEO of Russia's biggest oil company is not going to be banged up in jail like his predecessor. He was also out to assure the west it is business as usual at Yukos despite the continued imprisonment of its main shareholder and former boss Mikhail Khodorkovsky on fraud and tax evasion charges.
The quietly spoken Mr Kukes does not immediately come over as a serious power broker but appearances can be deceptive. This is a man who was involved in a ferocious row with BP some years ago and still faces racketeering charges -- along with other TNK executives -- in New York. He was a senior executive at TNK before the Russian oil company was taken over by BP.

Whereas the large physical presence of Mr Khodorkovsky, alongside his razor sharp intellect, was enough to convince most who met him that he was a force to be reckoned with, Mr Kukes is small and slim -- but pretty bright too. His curriculum vitae boasts that he holds 130 US patents and is the author of over 60 "scholarly" publications as well as holding a doctorate from the USSR Academy of Sciences.
Unlike Mr Khodorkovsky, the 58-year-old Mr Kukes is reserved and appears ill at ease as he sits in the foyer of the hip hotel. He looks every bit an identikit western executive with his crisp new grey suit, matching blue tie and shirt but then he was no newcomer to international capitalism despite being born and bred in Soviet Moscow.

He is a US citizen now, married to an American, did postgraduate studies at Rice University in Houston and spent eight years of his life as a technical director of Phillips Petroleum -- now ConocoPhillips -- mainly at its headquarters in Bartlesville, Oklahoma. He was drafted in to Yukos as chairman in June this year and took over from Mr Khodorkovsky when Russia's richest man stood down.
Mr Khodorkovsky was refused bail, escalating the dispute between him and the country's president, Vladimir Putin, and increasing the pressure on Yukos. The stand-off has taken its toll on western investor confidence in the country but the biggest loser so far has been Yukos.

The new boss admits there will continue to be some investor concern about Yukos as long as the Khodorkovsky dispute goes on but wants to emphasise that the company is about oil production not political theatre production.
"It's not a Yukos issue. The [freezing of Mr Khodorkovsky's] shareholding depends on him and the government. Right now we plan to continue our high growth strategy. Next year we will have increases of 12 %, which makes us the fastest growing oil company in the world," he says. Yukos expects to ramp up output to 3 mm bpd by 2005 leaving it not far short of BP, Shell and ExxonMobil. Mr Kukes says Yukos does not need to bulk up to take on TNK-BP and argues that talks about Exxon buying a stake are just "matters for individual shareholders".

But is it not possible that Mr Khodorkovsky's arrest, along with that of Yukos's head of security, could spread andthat Mr Kukes could be targeted as an oligarch?
"I do not have any shares for a start. It [the problems of Mr Khodorkovsky] is a matter of paying taxes and if you do not break the rules then there is no reason to fear arrest. It's up to the court to decide whether anything happened," Mr Kukes argues.
Is he, too, not one of those Russians whom critics call robber barons?
"I'm not a shareholder as I said. I get nice pay but nothing extraordinary. I have no stock options or anything like that. I am just doing my job as a hired guy, a manager. Oligarch? I wish," he laughs.

Hired hand he may be but Mr Kukes has certainly been around at the top of Russia's oil industry for a long time. Before joining Yukos in June he spent five years as president, CEO and board member at TNK. Previously, he had been executive vice-president for strategic planning and trading at Yukos and before that had worked for Amoco Oil (which, like TNK, is now merged with BP) in both Chicago and Moscow.
He indicates that it is dabbling in politics that can get you into trouble in Russia rather than being a businessman.
"I am not a political animal. I spent one year in Siberia [sorting out operational oil issues for TNK] in 2001. That is not what someone interested in politics does," he argues.

He does not sidestep all the controversy, admitting he was one of the figures at TNK who got into a spat with BP in the past when CEO Lord Browne alleged the Russians had illegally seized assets of Sidanco that it partly owned.
Additionally an ongoing legal case in New York brought by a small Canadian-based company, Norex Petroleum, alleges Mr Kukes along with the Alfa Group and other TNK officials have been involved in bribery and money laundering connected with the takeover of another Russian oil group, Yugraneft. Mr Kukes does not want to talk about this except to point out that when he was CEO of TNK he was concerned with strategic issues.
He adds: "It's water under the bridge. It would not be ethical of me to comment."

Meanwhile some investors are worried that Mr Putin's clampdown on business is a prelude to re-privatisation and an attempt to turn the clock back to a more centrally controlled economy.
"There is no way that's going to happen," claims Mr Kukes, who admits that Yukos is continuing to face closer inspection by the Kremlin than before. He is convinced this will blow over but admits he cannot put a time frame on exactly when that might happen.
"It might be one month or it might be six. That is the key for Yukos. We have got to separate the issue [politics from business]."

Mr Kukes likes to present himself as an ordinary guy who enjoys tennis but cannot indulge his passion for bridge "because people in Moscow only want to play to gamble".
Mr Kukes is also gambling that institutional investors will see him as a steady-handed technocrat who can rebuild confidence in the future of Yukos and his country.

Source: The Guardian
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