Global Policy Forum

By Timofey Iznorkin

The new company will become one of the largest oil companies in the world

Until recently, Russian oligarchs have been competing with each other, fighting over property. If they have occasionally joined their efforts to do something together, such actions were presumably aimed against someone else. And when such great oil companies as Yukos and Sibneft merge, one can say that the consequences will be very serious. The union between Yukos' CEO, Mikhail Khodorkovsky, and Sibneft's major shareholder, Roman Abramovich (also the governor of the Chukotka region), is likely to affect many figures in Russia's political and economic life.

Everything is more or less clear when it comes to the international significance of the merger. As the New York Times wrote, the merger of Yukos and Sibneft would form one of the world's largest oil companies, which would be capable of extracting up to 2.16 million barrels of crude daily. This number is comparable to the daily crude extraction of Canada, and it exceeds the daily amount of the U.S. Chevron Texaco Corp. According to experts' estimates, the market value of the new company might be evaluated at somewhere around $34 billion. One way or another, it will be the most valuable and most powerful Russian company from the point of view of company management.

It is worth mentioning here that this is a very unusual thing to happen during a pre-election year in Russia. Furthermore, Khodorkovsky is going to fund such parties as Yabloko, SPS (the Union of Right Forces) and the Communist Party, while providing considerable financial support to the United Russia party. In other words, there is every reason for Russian political and economic life to undergo profound changes. As usually happens in Russia, this might result in victims, taking into consideration that it is Mikhail Khodorkovsky who is to play the main role in the duet.

In the short term, it is hard to predict how the situation is going to develop. However, it is possible to say who is going to fall afoul of such a grand undertaking. The merger of two Russian oil giants will be a disaster for Leonid Polezhayev, the Omsk governor. After Polezhayev took the office of governor, he started cooperating with the oligarch Abramovich. The latter was a hugely powerful man at that period of time. Abramovich's company Sibneft had no problems at all, although many other companies and organization did not feel comfortable in the Omsk region. Sibneft's management got everything it wanted; they just had to wish for it.

Relations between the governor and local businessmen worsened a great deal. However, Abramovich helped Polezhayev to win battle after battle. It goes without saying that this eventually resulted in many enemies with whom the governor had to deal. Yukos had its plans for the Omsk region as well. Khodorkovsky did not conceal the fact that his company was rather interested in establishing control over the Omsk refinery. Yet, they showed Khodorkovsky the door.

This happened in the 1990s. Mikhail Khodorkovsky was not the man that he is now, so he just departed - although he promised to come back. Nowadays, Yukos is returning to the Omsk region in the form of YukosSibneft, and Khodorkovsky is the master: Abramovich has decided to stay aloof from the business, and Khodorkovsky will rule the new giant company. Polezhayev has been deprived of his protection, and there is no way that he can get any form of support whatsoever. The Russian people have a saying: "Do not have a hundred rubles; have a hundred friends." This is a wise saying indeed: When trouble comes, only friends can help.

But the Omsk governor does not have any friends, and there is no support either. Anatoly Chubais, the head of RAO UES of Russia, used to help Krasnoyarsk Regional Gov. Alexander Lebed, having intervened in the economic war in the region. Polezhayev will not have such support, for he took very serious measures against the energy industry this spring. The Omsk regional administration refused to clear multi-million-ruble debts to the energy company, initiating trial after trial. Criminal proceedings were started against the regional company Omskenergo on the governor's instigation. In addition, Omskenergo's director, Alexander Antropenko, was ousted from United Russia. To crown it all off, Polezhayev wrote several letters to Moscow threatening Chubais. However, the governor became rather quiet during Chubais' recent visit to the region. Polezhayev had a conversation with Chubais and disavowed all his claims publicly.

Polezhayev hoped for support from the Russian State Construction Committee in the field of the housing- and communal-system reform. The committee liked Polezhayev's suggestions, and they were highly appraised by high-ranking officials, by Leonid Drachevsky, the presidential envoy in the Siberian administrative district, for instance. However, Chubais has recently announced that the reform of the housing and communal system would be run by a consortium that unites RAO UES of Russia, Gazprom and other Russian large companies. The State Construction Committee does not wish to deal with the Omsk regional experience in the housing field, which basically comes to banal non-payments.

The city of Omsk used to be famous for its powerful defense enterprises. Almost nothing has been left of them, because of the governor's zealous activity. It was Gov. Polezhayev who insisted on the scandalous bankruptcy of the Omsk machine-building factory, one of the two Russian tank producers. It was the governor who drove defense enterprises to devastation, desiring to establish total personal control over them. One may say that he has achieved his goal: There are only three defense-industry enterprises left in the Omsk region, which used to be an important strategic region for Russia. For example, the Polyot enterprise does not produce anything, brings no profits, and its employees do not get paid for months. The only enterprise that runs is Relero, which manufactures defense equipment.

Will any defense enterprise support the governor? It's not likely. However, Polezhayev does not have any other way out but to talk to local businessmen and managers of defense enterprises. So far, he has been trying to get ahold of Moscow's ephemeral support. The situation sometimes even becomes ridiculous. At the end of April, the governor is to open an exhibition of drawings made by the children of Omsk. Drawings will be exhibited in the State Duma. Of course, no one is going to give him any money for the pre-election campaign - that's a fact. Most likely, offended Omsk businessmen will gloat over Polezhayev's misfortune, and young and aggressive top managers of the new oil giant will ruin his career completely.

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