As Russian oil giant OAO Yukos continues its attempt to maintain jurisdiction of its pending chapter 11 bankruptcy case in Houston, this report today confirms what had been suspected earlier — i.e., that energy-driven China loaned Russia $6 billion secured by future oil shipments to help finance the effective nationalization of Yuganskneftegaz (“Yugansk”), which was Yukos’ main production unit and produces about 1% of the world’s crude oil output.
Russian state oil company OAO Rosneft had taken over management of Yugansk in December after a Russian shell company had purchased the unit at a Russian government auction. There had been discussions of a sale of a 15% stake in Yugansk with state oil companies from China, but apparently those talks are now on hold.
The loan is effectively a forward payment for a total of about 352 million barrels of oil that Rosneft has already agreed to ship to China through 2010. The contract replaces an earlier deal between China and Yukos. China is being quite aggressive in oil markets these days as it attempts to satisfy the country’s growing demand for oil, which is currently estimated to be over 6 million barrels a day.
The Russian state takeover of Yugansk has raised concerns in Western markets over the Russian government’s commitment to the rule of law, which is a key component of a market economy. Although Western oil and gas interests remain interested in investing in Russia’s vast oil and gas reserves, Yukos’ chapter 11 case and the the threat of legal action has chilled Western companies from getting involved in the bidding for Yugansk. The Russian government has jailed several current and former Yukos executives — the most prominent being former Yukos CEO and main shareholder, Mikhail Khodorkovsky — in a campaign that Yukos claims is merely a government campaign to nationalize Russia’s oil and gas industry.