Yukos probes could expand over next two years

Nov 12, 2003 01:00 AM

Russia's deputy prosecutor warned that the inquiries into the embattled oil group Yukos could expand over the next two years. Vladimir Kolesnikov told Russian politicians that there could be further charges against Mikhail Khodorkovsky, Yukos' former CEO and largest shareholder, and that he might remain in pre-trial detention for up to two years.
Separately, local officials said they had opened an investigation into conformity with the conditions of its licences at Yugansneftegaz, its main production site. The comments came as Simon Kukes, the new CEO of Yukos, said that a strategic plan for the company would not be presented to the board until at least next July, by which time he hoped the political controversy surrounding the Russian oil company would have blown over.

Mr Kukes also accused Mikhail Khodorkovsky, his predecessor at Yukos, of having a conflict of interest during recent negotiations with ChevronTexaco and ExxonMobil for a strategic stake in Yukos, in an attempt to further distance himself from any such deal.
"This is an example of a small conflict of interest," he said. "I think he negotiated as a shareholder, not a CEO."
If the discussions had been about company strategy, Mr Kukes argued, the board would have given its blessing first and then negotiations would have taken place. Mr Kukes has downplayed the need for Yukos to link up with an international major, in a move some analysts see as reflecting political concerns within Russia about handing control of the country's strategic reserves to foreigners.

Mr Kolesnikov in Moscow said that the decision to detain Mr Khodorkovsky in custody was in line with Russia's criminal code. With Mr Khodorkovsky now in a Russian jail and his sizeable stake in Yukos frozen, Mr Kukes, a Russian-born US citizen, has signalled that the former CEO's invitations to big oil companies made little strategic sense.
For ExxonMobil and ChevronTexaco, any revival of talks must also be accompanied by a clearer picture of Moscow's intentions. But Russia's vast oil reserves remain attractive and western oil executives expect to return to negotiations when the political environment improves. At Mr Kukes' previous job as head of TNK, it took him just six months to realise that the Russian oil company needed a strategic partner.

One week into his job at Yukos, Mr Kukes said TNK's need for a foreign name did not hold true for Yukos, its embattled larger competitor. "BP was ahead of the game and at that time there was an obvious synergy. The final decision was good for all shareholders," he said.
TNK also had more complicated assets to develop that required external assistance, he added. But he questioned whether Yukos needed managerial and technical assistance from a western oil company. Unlike at TNK, Mr Khodorkovsky groomed managers and built technical research facilities that are capable of developing Yukos' assets.
But Mr Kukes still has to contend with the threat that he will not have fields to develop if investigators pick apart Yukos's licence agreement. "Some see the current situation as an opportunity [for investigators] to pick away at licences," he said. "So far no one took away any licences from anyone. I am reasonably confident."

As he pointed to a photograph of Mr Khodorkovsky behind bars, Mr Kukes said recent events have undermined investors' confidence in Yukos. He also knows that distancing the company from the reputation and record of its embattled former CEO will be no easy task.
"If it were up to me, I would remove the pictures of Khodorkovsky [from Yukos's lobby walls] and the 'target Yukos' site [depicting Mr Khodorkovsky's struggles on the company website]. But you have to respect the team decision. It is one thing to say he is gone, it is another to understand that he is gone."

Source: Moscow Times
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