Global Policy Forum

By Valeria Korchagina

Monday came and went without word from either Yukos or Sibneft on the fate of their stalled merger, leading analysts to conclude that a deal to create the world's No. 4 oil producer is now dead. "There is no return from the current situation," said Steven Dashevsky, head of research at the Aton brokerage. "There are no longer grounds to forge a partnership."

Sibneft shocked the market Friday by pulling out of what would have been a historic $35 billion tie-up just minutes before the two companies were to hold their first joint board meeting to enshrine the new company's charter and approve its new name, YukosSibneft. The main shareholder of the much-smaller Sibneft, Roman Abramovich, reportedly with the Kremlin's blessing, demanded that Sibneft CEO Eugene Shvidler be given operational control of the new company and that former presidential chief of staff Alexander Voloshin be named board chairman.

Group Menatep, Yukos' parent company, said it would issue a statement Monday evening, but it never came. Senior company officials gathered in London to decide how to react to Abramovich's demands and how to unwind the deal if need be. Yukos has already paid $3 billion in cash and 26 percent of its own shares for 92 percent of Sibneft, and it is unclear how these transactions can be reversed legally. Yukos shares fell 4 percent Monday as investors grew increasingly concerned over the oil giant's future.

This uncertainty, Deputy Prime Minister Viktor Khristenko said, is increasing volatility on the entire market, adding that the sooner the number of legal cases against Yukos and its core shareholders are resolved in the courts, the better. "Somebody is making money on [this volatility]," he told European business leaders in Moscow, Prime-Tass reported. Investors, however, applauded Sibneft's move, sending the company's shares soaring 15 percent at one point Monday, before finishing the day with a gain of more than 7 percent. "Regardless of the future scenarios for the merger, the move looked positive for Sibneft," said Kakha Kiknavelidze, oil and gas analyst at Troika Dialog.

Kiknavelidze said Yukos' legal troubles -- two of its founders, Mikhail Khodorkovsky and Platon Lebedev, have been jailed -- has put Sibneft in a much stronger negotiating position because Yukos needs the merger much more than Sibneft does. Officially, Sibneft said it called off the merger for "technical reasons," not "political reasons." If this is true, it may mean that the legal problems Yukos is facing may be more serious than previously thought, Kiknavelidze said.

Prosecutors, who have sequestered 40 percent of pre-merger Yukos shares as a safeguard, say Khodorkovsky alone has cost the state $1 billion. Local media have reported that Yukos may be hit with a tax bill as high $10 billion. "If Sibneft shareholders walk away from this deal because of these issues, then this reported tax bill is really a big deal," Kiknavelidze said, adding that Sibneft may be adopting an offensive, not defensive, strategy. "[Sibneft] may be trying to end up with managerial or even full control of Yukos."

Sibneft founder Boris Berezovsky, a critic of President Vladimir Putin who lives in exile in London, said judging by the past actions of Abramovich, his former partner, the probability of the merger going ahead is now "zero." - "Instead, a deliberate destruction of [Yukos] is under way," Berezovsky said by telephone. He said the Kremlin's first choice was to have Sibneft gain control over Yukos, but with that attack foiled the next step will be a court ruling confiscating the 39.6 percent Yukos stake frozen by the Prosecutor General's Office.

"The shares will then be auctioned to companies that are loyal to the Kremlin," he said. "Clearly, Sibneft doesn't want to partner up with Yukos," said Stephen O'Sullivan, co-head of research at United Financial Group. "They do not want to renegotiate the deal, they just don't want to merge." O'Sullivan said that whatever happens, Yukos as a company is unlikely to be destroyed.

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.