Russian state firm snaps up Yukos stake

A valuable shareholding of bankrupt oil giant Yukos was snapped up by the Russian state-controlled Rosneft for just a fraction more than the opening auction price yesterday.

Rival bidder TNK-BP gave up after the price climbed by just 1.5 per cent, despite claiming it was in the auction to win, and even though the price was still 10 per cent below market value.

The sudden emergence of rival interest last week from BP's Russian subsidiary came after the firm's outgoing chief executive, Lord Browne, met Russian president Vladimir Putin. TNK-BP has come under intense scrutiny from the Kremlin since it is the only major energy firm in Russia still in foreign control.

However, the company's earlier rhetoric was not matched by its behaviour yesterday, leaving Rosneft to buy up the 9.44 per cent stake in its own equity which had been under Yukos's control. It paid just over €6.07 billion, a 10 per cent discount on the current market price in Rosneft's shares. Until BP's late expression of interest, the sale to Rosneft was taken for granted after it borrowed €17 billion from international banks to fund the deal.

It now intends to place the shares back on the open market, using them as a "strategic currency", increasing its free float, and as the basis for further overseas expansion.

"We intend to use the acquired shares in energy asset swaps in Russia and abroad. We will also place the biggest part on the market to expand our shareholder base," said a Rosneft spokesman in Moscow yesterday.

Defending its bidding tactics, TNK-BP, which is 50 per cent owned by BP, said that after the price rose slightly, it reached its outside limit, after the two bidders had placed five incremental bids each. "We're disappointed but we took it to where we were comfortable paying," said a company representative.

Mikhail Khodorkovsky, the former driving force behind Yukos, once Russia's largest oil firm, is serving an eight-year prison term for tax fraud. He had been in talks to sell the energy firm to US multinationals and was becoming increasingly vocal in his criticism of the Kremlin at the time of his arrest.