Putin backs sale of Yukos's core asset

Russian President Mr Vladimir Putin threw his weight behind the controversial sale of oil firm Yukos's core asset, Yugansk, yesterday despite a threat from the stricken company to escalate its legal battle in foreign courts.

A day after his finance minister said he knew nothing about the mystery winner of Yugansk at Sunday's auction, now in charge of 11 per cent of Russian oil output, Mr Putin revealed that the company's owners were individuals active in the energy sector for "many years".

"As far as I've been informed, the auction conformed completely with current Russian law, and I expect that all other activities in this area in the future will also take place according to law," Mr Putin said after meeting German chancellor Mr Gerhard Schröder in Schleswig, Germany.

Mr Putin did not identify the owners of Baikal Finance, which was unknown before it acquired Yugansk in Sunday's auction. The firm does not possess a single oil well or even a website, and yet lodged the winning $9.4 billion bid.

China's state-controlled China National Petroleum, which has a cooperation deal with state gas monopoly Gazprom, might have a role in managing Yugansk, he said. Russian newspapers linked Baikal Finance to Russian oil firm Surgutneftegaz. The company, run by reclusive businessman Mr Vladimir Bogdanov, has denied any links to Baikal.

Yukos stepped up the legal pressure, saying the sale violated a US bankruptcy stay.

It threatened legal action for $20 billion (€15 billion) in damages against third parties participating in the sale, raising the prospect of oil cargo seizures abroad and adding to concerns over supplies from the world's second-biggest oil exporter.

The Yugansk auction is the culmination of a Kremlin campaign to crush Yukos's politically ambitious principal owner, Mr Mikhail Khodorkovsky, and seize control of strategic sectors of the economy sold off in the chaotic privatisations of the 1990s.

White House spokesman Mr Scott McClellan said yesterday the Bush administration was disappointed that Russia went ahead with the auction of Yugansk.

"We have communicated to the Russian government repeatedly that its handling of the Yukos matter could have a chilling effect on foreign investment in Russia and affect its role in the global economy," he said.