After announcing late last week that Yuganskneftegaz (“Yugansk”) — OAO Yukos‘ former primary production unit — would not be transferred to state-controlled OAO Gazprom as anticipated, the Russian government announced over the weekend that Yugansk is now operating as a subsidiary of OAO Rosneft, the Russian government’s oil company that is currently merging with Gazprom.
This latest news confirmed that nobody in the West really has a clue of what the Kremlin has planned for Yugansk.
In the meantime, the China National Petroleum Corp. told the Wall Street Journal ($) that they were not aware of the Kremlin’s offer of a stake in Yugansk reported in this previous post. The Journal article speculates that the Kremlin-China talks regarding Yugansk are taking place at the highest levels of the two governments and that the details simply have not been delegated to the operators of the state-controlled oil companies yet.
The Russian government previously forced the sale of Yugansk last month to defray the government’s alleged back-tax claims against Yukos that total $28 billion. After a Houston Bankruptcy Court issued a TRO in Yukos’ chapter 11 case enjoining any Western financial institutions from participating in the auction, a shell bidder emerged at the auction to buy Yugansk for $9.4 billion. Rosneft subsequently agreed to buy the shell bidder for an undisclosed amount. A hearing is scheduled in the Houston Bankruptcy Court this Thursday on Gazprom’s motion to dismiss the Yukos’ chapter 11 case. Here are the previous posts on the Yukos’ chapter 11 case and related matters.
Finally, as if the Russian government’s handling of Yukos was not enough of a deterrent to Western investment in Russian business interests, this Wall Street Journal ($) article notes that the measures taken by prosecutors and the Russian courts have exacerbated the vulnerability of defense lawyers who represent interests competing with those of the Russian government in the notoriously political Russian judicial system. As the Journal article observes:

In recent months, the arrests and interrogations of Yukos lawyers have fueled fears that those who defend politically unpopular clients could themselves become targets. Two senior Yukos legal officers fled Russia this fall to escape criminal prosecution, while a lower-ranking colleague who stayed, Svetlana Bakhmina, was arrested last month. Another Yukos legal consultant, Elena Agranovskaya, was detained a day later. Prosecutors also have launched sweeping searches and interrogations of other Yukos lawyers and middle managers.

Along these same lines, note this Boston Globe article on the fear and self-censorship that is occurring under the Putin regime in Russia. One of the emerging business issues of 2005 is the degree to which the above-described Russian government actions will chill badly needed Western investment in Russian business interests?