For Washington and other major imperialist powers, investments in Russia, with its large industrial base and major natural resources—including oil, gas, coal, and many minerals—have been viewed as a potentially attractive proposition down the road if a stable capitalist regime and “rule of law” is established. But investors from imperialist countries are becoming more nervous about their ability to even get their capital back, let alone transforming it into a profit-making venture.

At the center of the most recent conflict is the Russian government’s decision to dismantle Yukos, the country’s largest oil producer. Yukos’s major subsidiary—the Yuganskneftegaz unit—was placed on the auction block to recover some of the $28 billion the Kremlin claims it is owed in back taxes. Yukos employs 130,000 workers in 60 Russian cities, pumps nearly 20 percent of all Russian oil, and supplies 2 percent of the world’s consumption. Its huge subsidiary alone pumps as much oil a day as all of Indonesia, and more than OPEC member Qatar.

The founder of Yukos and its main shareholder, Mikhail Khodorkovsky, has increasingly come into conflict with the grouping of government bureaucrats led by Russian president Vladimir Putin. Khodorkovsky, a banker who took control of oil assets at a 1993 state auction, enriched himself, becoming the wealthiest man in Russia. But he didn’t take into account that lots of money is not enough when going up against competitors who control the government, who did use taxation and other means to land him in jail. After revealing that negotiations were in the works to sell part of Yukos to a major western oil company, Khodorkovsky was arrested and jailed in October 2003 on charges of tax evasion and embezzlement. He faces up to 10 years in prison.

Putin and Khodorkovsky and their lieutenants come out of the Stalinist bureaucratic apparatus that ruled over the former Soviet Union for decades. This bureaucracy functioned as a parasitic caste sitting on top of the workers state that came into existence through the October 1917 socialist revolution in Russia that brought workers and farmers to state power. While betraying the revolution and carrying out a political counterrevolution, this parasitic layer did not reestablish capitalism. Efforts to sell-off Russia’s state-owned industries and create a capitalist class out of this bureaucracy have been under way since the break-up of the Soviet Union in 1991. But as current events show this is an unstable and drawn-out process.  
 
‘Foreign investors on edge’
“The Russian government’s prosecutorial assault on Yukos and its founder,” stated a December 20 New York Times article, “has set foreign investors on edge and raised questions about the rule of law, property rights,” and Putin’s “commitment to economic change.” Since this dispute began, added the Times, “Yukos has lost $38 billion off its peak market capitalization, leaving it at about $2 billion today.”

From the time the auction of the Yukos unit was announced, Gazprom, the largest company in Russia, made clear its intention to bid for it. Gazprom produces 94 percent of Russia’s natural gas and controls 25 percent of the world’s reserves. It operates Russia’s domestic gas pipeline network and delivers gas to former Soviet republics and another 25 European countries. The Russian government controls about 38 percent of the company, according to an Associated Press report.

In a desperate effort to halt the Russian government’s planned auction, officers of Yukos filed for Chapter 11 bankruptcy protection December 15 in a federal court in the United States. The petition was filed in Houston, where the company’s chief financial officer, Bruce Misamore, has a residence and the company paid a retainer to a U.S. law firm to represent it in the proceedings.

That same day in a protest over the Kremlin’s plans, three directors at Yukos—Jacques Kosciusko-Morizet, a former vice president at Crédit Lyonnais; Raj Gupta, a former vice president at Phillips Petroleum; and Sarah Carey, a lawyer at Squire, Sanders & Dempsey in Washington—resigned from the company’s board.

On December 16 a federal bankruptcy judge in Houston, Letitia Clark, issued a temporary restraining order intended to block participation in the auction of Gazprom and a consortium of banks planning to finance its bid. The banks—including ABN Amro, BNP Paribas, Calyon, Deutsche Bank, J.P. Morgan, and Dresdner Kleinwort Wasserstein—then froze $10-$13 billion they had planned to lend Gazprom.

In her decision, Clark wrote, “Participants in international commerce, in Russia, in the United States and elsewhere, need to have an expectation that when they invest in foreign enterprises they may do so without fear that their investments may be the subject of confiscatory action by agencies of the foreign government.”

At the December 19 auction a previously unknown company, Baikal Finance Group, placed the only bid—$9.3 billion—winning control of the Yukos unit. One of the correspondents for the ITAR-Tass news agency visited the address listed for this company in Tver, 125 miles northwest of Moscow, finding only a mobile phone and a 24-hour grocery store. To be eligible to participate in the auction, the company paid a nonrefundable deposit of $1.7 billion, which “it apparently transferred from an account of Sberbank, the state savings bank,” reported the Financial Times. Baikal has 14 days to pay the rest of the bidded price. If it fails to do so the Yukos unit will be transferred to the Russian state.

An article in the December 20 International Herald Tribune said that the “mystery surrounding the winner” has raised suspicions that Putin’s government may be behind Baikal.

“Russia is sliding toward being uninvestable. The whole thing is very sad,” bemoaned Martin Taylor, hedge fund manager at London-based Thames River capital, reported Reuters.

A 1998 report by the pro-imperialist U.S. Freedom House states that some 95 percent of the 24,000 state and collective farms in Russia “have been reorganized, but are largely unreformed,” meaning the land is still not privatized. “Over 70 percent of state-controlled industry has been turned over to private ownership since market reforms began in 1992,” the report states. “Nevertheless, the ‘crown jewels’ of industry remain state monopolies, and they still dominate almost every major industrial sector.”

In another development, Moscow has decided to build a Siberian oil pipeline to the Pacific port of Nakhodka, a route favored by Tokyo, which would enable Russia to export oil to Japan, as well as other Asian countries and the United States. Beijing had been seeking an alternative pipeline to bring oil to Daqing in northwest China. “Moscow appeared to prefer the Tokyo-backed pipeline not only because of the economic carrots,” reported the Asia Times, “but also due to Russia’s reluctance to depend on a single buyer, as would be the case with the Chinese option.”  
 
 
Front page (for this issue) | Home | Text-version home