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[When American oil companies low-bidded some important Russian oil properties in an auction, they expected to get this valuable asset for pennies on the dollar, just as major transnationals have bought up other billions of dollars worth of property since the implosion of the Soviet Union. When they found out that they were outbid, they started screaming for "democracy." Their corporate-owned "news" sources joined the hue and cry; consequently, we are getting an extremely tortured version of events in our "news." Part of the drama is being played out in Houston, where Paul Hill sets the record straight. --J.L.]


By Paul Hill

HOUSTON - The most important subsidiary of the Russian oil company, Yukos, was auctioned off on 12/19/04 to a little known company, BaikalFinansGroup. According to the New York Times "The auction was reminiscent of the controversial, insider-led privatization deals conducted in the early 1990's - with murky financing, questionable bidding and unknown shell companies representing powerful financial groups and emerging as the winner of lucrative assets." BaikalFinansGroup won Yukos' biggest asset, Yuganskneftegaz, with a bid of $9.35 billion. Yuganskeftegaz pumps 11% of the oil produced in Russia. Russian oligarch, Mikhail Khodorkovsky, and his banking empire, Menatep, bought Russia's second largest oil company, Yukos, in the chaos of the collapse of the USSR for $300 million in 1995. By the end of 2003, the oil company was worth $27 billion.

Mr. Khodorkovsky is currently in prison. He was arrested in October, 2003 on charges of personal tax evasion, fraud and embezzlement. The apologist American Enterprise Institute notes that "As regards the charges against Mr. Khodorkovsky: it is likely that in the 1990s he broke some laws. But in the chaotic Russian economy of the time, when the state was privatizing its assets on a grand scale, no large business in Russia was "clean"-and the larger the company, the greater the chance it committed violations...Tax evasion was the only strategy that allowed an entrepreneur to pay salaries and invest in his business."

The Moscow Times reports that the Prosecutor General's office declared, "The way in which billions of rubles and dollars were so brazenly and shamelessly stolen is astonishing even to the most experienced prosecutors and investigators...the sum of stolen money, property and unpaid taxes is becoming astronomical." The conservative Houston Chronicle points out that Yukos "is not without sin, of course. Its core assets, like others once controlled by the Soviet state, were acquired kleptocratically after the fall of communism." This is a euphemism for property stolen from the Soviet people.

Bruce Misamore, Yukos' chief financial officer, returned home to Houston on Dec. 4 and made a last ditch effort to thwart the auction. He asked U.S. bankruptcy judge Letitia Clark for Chapter 11 protection for Yukos and a temporary restraining order designed to freeze banks' ability to loan money to finance the sale of the subsidiary according to the Houston Chronicle. Judge Clark granted a temporary restraining order intended to freeze Deutsche Bank's ability to loan money to finance the sale. Mr. Misamore may face criminal charges in Russia. In the court hearing, it was pointed out that of the 100,000 Yukos'employees, only one, Mr. Misamore, is based in Houston.

Gazprom, a Russian state owned natural gas company, was thought to be a major contender in the auction. As it turned out, the company did not bid in the auction. It did file an appeal in U.S. federal court on Dec. 18 asking U.S. District Judge Nancy Atlas to repeal the temporary restraining order issued by Judge Clark. The Russian company's attorneys argued that the oil company did not fall within the jurisdiction of the U.S. bankruptcy court in Houston. Judge Atlas declined to recognize this point.

On 12/28/04, Deutsche Bank filed a motion to dismiss Yukos' bankruptcy case in Houston calling the Yukos bankruptcy filing a "blatant attempt to artificially manufacture a basis for jurisdiction" according to Reuters.

The Morning Star, British socialist daily, reports that "the state-owned Rosneft oil company" bought BaikalFinansGroup on 12/23/04. President Putin is reported to have said "Today, the state - using absolutely legal, market mechanisms - is ensuring its interests. I consider this perfectly normal." Mr. Putin also noted that following the collapse of the Soviet Union "some market participants got multibillion state assets using different tricks, including some violations of then-existing legislation."

The Morning Star further notes "President Vladimir Putin yesterday accused the West, and the US in particular, of trying to isolate Russia and even split it by interfering in Moscow's relations with its former Soviet neighbours."
Other subsidiaries of Yukos are thought to be at risk for similar actions by the Russian government for failure to pay taxes. The Moscow Times reports that "mounting tax charges against Samaraneftegaz and Tomskneft indicate, analysts say, that these two units could soon be heading for the same fate as Yukos' main production unit, Yuganskneftegaz."
Rodger Baker in an article for Stratfor offers this analysis "We are now entering the post-Cold-War era, in which the Russian experiment with democracy and free markets has come, failed and gone. Gazprom's state funded quest to control the Russian energy market - be it oil, natural gas or electricity - marks a return to a centralized Russian economy, or at least a centrally controlled and state-owned oil and gas sector..."

It is interesting that when the Russian government attempts to collect taxes from an enterprise based on theft from the Soviet people in an effort to rectify a debt to the Russian people, the capitalist cronies make like chickens coming home to roost. They flock to Houston to file ludicrous legal manipulations to thwart the Russian government's actions.

Yukos hysterically declared that the Russian government's actions "can only be described as out-and-out terror, its methods and forms rivaling the Stalinist terror campaign of 1937." Perhaps it should be pointed out that the massive theft and original swindle perpetrated on the Soviet Union by the U.S. and its capitalist cronies qualifies as economic terrorism. Hopefully this action taken by the Russian government will slow down the massive corruption and resultant impoverishment of the Russian working class seen since the collapse of the Soviet Union.