Reply #29: Houston, we have a Yukos problem

[54anickel]

http://www.atimes.com/atimes/Central_Asia/FH26Ag03.html

BRUSSELS - The crucial consequence of Moscow's campaign to nail Yukos, the country's leading oil producer, is the end of any possible energy alliance between Russia and the US, according to European Union diplomats and officials.

Yukos' former golden boy, chief executive Mikhail Khodorkovsky, languishing in jail since October 2003, was President George W Bush's and Vice President Dick Cheney's man. But way beyond his personal fate, it is the symbol of the fall of Yukos - no hope of cheap Russian oil for America and extra profits for ExxonMobil, ChevronTexaco and ConocoPhillips - that is really rattling markets and driving oil prices higher.

Soon after September 11, when the Bush administration seriously started looking for major oil sources other than the Saudis, a deal with Russian oligarchs might have seemed the ideal solution. In May 2002, at a summit in Moscow, Bush and Russian President Vladimir Putin forged what looked like an alliance, further developed in an "energy summit" held in a Houston steel-and-glass tower in October of that year. The deal was straightforward: Washington/Houston injects tons of dollars into the Russian oil sector, and Russia up to 2010 becomes America's number one supplier. The key Russian partner in this deal was to be Khodorkovsky - the son of a Moscow worker turned king of business and head of Yukos, producer of 1.7 million barrels of oil a day and the largest Russian oil company ahead of LUKoil.

Khodorkovsky could not but be a Western darling. His hero was Standard Oil's founder John Rockefeller. He installed five Americans on the Yukos board. The company's public relations was handled by an American firm. He created a charity, Open Russia, which boasted Henry Kissinger and Lord Rothschild as chairmen. Wall Street loved him, because he guaranteed fortunes to Yukos' shareholders, especially himself (he owns 44% of the shares).

In April 2003, as the US was taking over Iraq, Yukos was about to take over one of its rivals, Sibneft. This would have created a US$35 billion company, the fourth-largest private company in the world and the first in Russia, with oil production similar to Kuwait's (2.3 million barrels a day). But just as Khodorkovsky was entertaining the idea of selling control of Yukos to ChevronTexaco, Putin struck. In October, Yukos was billed $3.4 billion for back taxes for 2000, its assets frozen and Khodorkovsky was in jail and on trial on separate charges of tax evasion and fraud.

Russia's shock and awe

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