Baikalfinansgrup
Encyclopedia
Baikalfinansgrup is a Russian limited liability company owned by Rosneft Oil Company
. It is best known as the company that won the December 19, 2004 auction for a 76.79% share in Yuganskneftegaz
, formerly the core production subsidiary of Yukos Oil Company
. Baikalfinansgrup won the auction with a bid of 261 billion rubles
(US $9.3 bn), which was somewhere between 37-49% of Yuganskneftegaz’ market value at the time, according to an appraisal made by Dresdner Kleinwort Wasserstein and JPMorgan Chase & Co.
http://www.msnbc.msn.com/id/6726341/.
($358 US). Its original registered address was in the north-western Russian city of Tver
in a building that houses a vodka bar, a mobile phone shop, a tour operator agency and the offices of several small local companies, but no office of Baikalfinansgrup. Baikalfinansgrup later moved its legal address to the head office of Rosneft Oil Company
, which is situated on Sofiyskaya Embankment directly opposite the Kremlin
.
Despite its obscurity, Baikalfinansgrup was able to secure a credit of US $1.7 bn from the state-owned Sberbank
savings bank as a down-payment for participating in the auction.
On December 21, 2004, Russian president Vladimir Putin
admitted that he knew the owners of Baikalfinansgrup. Putin did not disclose their names but noted that they were individuals with ‘many years of experience in the energy business’.
, which was previously run by Russian businessman Mikhail Khodorkovsky
. In 2003, the Russian tax authorities charged Yukos and Khodorkovsky with large-scale tax evasion. On April 14, 2004, Yukos was presented with a bill for over US $35 bn in back taxes and a demand to pay the entire bill the same day. Requests by Yukos to defer payment, allow payment by instalments or to discharge the debt by sale of peripheral assets, including its shareholding in the Sibneft oil company, were also refused. Since Yukos was both legally and physically unable to pay the entire amount in cash on such short notice, Russian bailiffs froze Yukos’ shares in Yuganskneftegaz.
On November 19, 2004, Russian bailiffs placed a notice in the Russian government newspaper Rossiyskaya gazeta
announcing that Yuganskneftegaz would be sold at an auctioned scheduled to be held 30 days later on December 19, 2004 http://www.rg.ru/2004/11/19/uganskneftegaz-dok.html. The conditions for participation in the auction included an advance deposit of US $1.7 bn and prior clearance by the Russian Federal Antimonopoly Service
.
In early December, the Russian state-controlled gas monopoly Gazprom
submitted an application to participate in the auction through its wholly owned subsidiary, Gazpromneft
. Gazpromneft
had been created in September 2004 in preparation for a planned merger between Gazprom
and state-owned Rosneft
.
On December 15, 2004, Yukos filed for a bankruptcy protection in a Houston court, and obtained a temporary injunction prohibiting Gazprom
from participating in the auction. On the next day, December 16, a group of Western banks withdrew their financial support for the Gazprom
application. On the same day, the previously unknown Baikalfinansgrup applied to participate in the auction.
On December 19, 2004, only two companies appeared for the auction: Gazpromneft
and Baikalfinansgrup. Gazpromneft
declined to place any offer, thus allowing Baikalfinansgrup to acquire Yuganskneftegaz on its first bid.
Four days later Baikalfinansgrup was acquired by Rosneft. Rosneft later disclosed it its annual financial statement that it had financed the acquisition of Yuganskneftegazhttp://www.rosneft.com/english/company/GAAP2004_english.pdf. At the time, Rosneft president Sergey Bogdanchikov
was also the CEO of Gazpromneft
http://www.kommersant.com/page.asp?idr=500&id=-2970.
Shortly after the auction, the planned merger between Gazprom and Rosneft merger was called off, and Sergey Bogdanchikov resigned his post as CEO of Gazpromneft.
On February 7, 2006, in response to a question by a Spanish journalist, Russian President Vladimir Putin
disclosed that Rosneft had used Baikalfinansgrup as a vehicle to acquire Yuganskneftegaz
in order to protect itself against litigation riskshttp://www.kremlin.ru/appears/2006/02/07/1759_type63379_101129.shtml.
Rosneft
Rosneft is an integrated oil company majority owned by the Government of Russia. Rosneft is headquartered in Moscow’s Balchug district near the Kremlin, across the Moskva river...
. It is best known as the company that won the December 19, 2004 auction for a 76.79% share in Yuganskneftegaz
Yuganskneftegaz
Yuganskneftegaz is a wholly integrated subsidiary of Rosneft that owns and operates the second largest oil production complex in Russia. It was formerly the most important production subsidiary of Yukos, but was expropriated by the Russian government and given to Rosneft, a state-owned...
, formerly the core production subsidiary of Yukos Oil Company
YUKOS
OJSC "Yukos Oil Company" was a petroleum company in Russia which, until 2003, was controlled by Russian oligarch Mikhail Khodorkovsky and a number of other prominent Russian businessmen. After Yukos was bankrupted, Khodorkovsky was convicted and sent to prison.Yukos headquarters was located in...
. Baikalfinansgrup won the auction with a bid of 261 billion rubles
Russian ruble
The ruble or rouble is the currency of the Russian Federation and the two partially recognized republics of Abkhazia and South Ossetia. Formerly, the ruble was also the currency of the Russian Empire and the Soviet Union prior to their breakups. Belarus and Transnistria also use currencies with...
(US $9.3 bn), which was somewhere between 37-49% of Yuganskneftegaz’ market value at the time, according to an appraisal made by Dresdner Kleinwort Wasserstein and JPMorgan Chase & Co.
JPMorgan Chase & Co.
JPMorgan Chase & Co. is an American multinational banking corporation of securities, investments and retail. It is the largest bank in the United States by assets and market capitalization.It is a major provider of financial services, with assets of $2 trillion and according to Forbes magazine is...
http://www.msnbc.msn.com/id/6726341/.
Profile
Baikalfinansgrup was created on December 6, 2004, just two weeks before the Yuganskneftegaz auction, with a share capital of 10,000 rublesRussian ruble
The ruble or rouble is the currency of the Russian Federation and the two partially recognized republics of Abkhazia and South Ossetia. Formerly, the ruble was also the currency of the Russian Empire and the Soviet Union prior to their breakups. Belarus and Transnistria also use currencies with...
($358 US). Its original registered address was in the north-western Russian city of Tver
Tver
Tver is a city and the administrative center of Tver Oblast, Russia. Population: 403,726 ; 408,903 ;...
in a building that houses a vodka bar, a mobile phone shop, a tour operator agency and the offices of several small local companies, but no office of Baikalfinansgrup. Baikalfinansgrup later moved its legal address to the head office of Rosneft Oil Company
Rosneft
Rosneft is an integrated oil company majority owned by the Government of Russia. Rosneft is headquartered in Moscow’s Balchug district near the Kremlin, across the Moskva river...
, which is situated on Sofiyskaya Embankment directly opposite the Kremlin
Moscow Kremlin
The Moscow Kremlin , sometimes referred to as simply The Kremlin, is a historic fortified complex at the heart of Moscow, overlooking the Moskva River , Saint Basil's Cathedral and Red Square and the Alexander Garden...
.
Despite its obscurity, Baikalfinansgrup was able to secure a credit of US $1.7 bn from the state-owned Sberbank
Sberbank
Sberbank Rossii is the largest bank in Russia and Eastern Europe. The company's headquarters are in Moscow and its history goes back to Cancrin's financial reform of 1841...
savings bank as a down-payment for participating in the auction.
On December 21, 2004, Russian president Vladimir Putin
Vladimir Putin
Vladimir Vladimirovich Putin served as the second President of the Russian Federation and is the current Prime Minister of Russia, as well as chairman of United Russia and Chairman of the Council of Ministers of the Union of Russia and Belarus. He became acting President on 31 December 1999, when...
admitted that he knew the owners of Baikalfinansgrup. Putin did not disclose their names but noted that they were individuals with ‘many years of experience in the energy business’.
Yuganskneftegaz auction
Yuganskneftegaz was the core production subsidiary of Yukos Oil CompanyYUKOS
OJSC "Yukos Oil Company" was a petroleum company in Russia which, until 2003, was controlled by Russian oligarch Mikhail Khodorkovsky and a number of other prominent Russian businessmen. After Yukos was bankrupted, Khodorkovsky was convicted and sent to prison.Yukos headquarters was located in...
, which was previously run by Russian businessman Mikhail Khodorkovsky
Mikhail Khodorkovsky
Mikhail Borisovich Khodorkovsky is a Russian prisoner, considered by some - such as Amnesty International - to have been imprisoned for political reasons, jailed until 2016 and a former Russian oligarch and businessman...
. In 2003, the Russian tax authorities charged Yukos and Khodorkovsky with large-scale tax evasion. On April 14, 2004, Yukos was presented with a bill for over US $35 bn in back taxes and a demand to pay the entire bill the same day. Requests by Yukos to defer payment, allow payment by instalments or to discharge the debt by sale of peripheral assets, including its shareholding in the Sibneft oil company, were also refused. Since Yukos was both legally and physically unable to pay the entire amount in cash on such short notice, Russian bailiffs froze Yukos’ shares in Yuganskneftegaz.
On November 19, 2004, Russian bailiffs placed a notice in the Russian government newspaper Rossiyskaya gazeta
Rossiyskaya Gazeta
Rossiyskaya Gazeta is a Russian government daily newspaper of record which publishes the official decrees, statements and documents of state bodies...
announcing that Yuganskneftegaz would be sold at an auctioned scheduled to be held 30 days later on December 19, 2004 http://www.rg.ru/2004/11/19/uganskneftegaz-dok.html. The conditions for participation in the auction included an advance deposit of US $1.7 bn and prior clearance by the Russian Federal Antimonopoly Service
Federal Antimonopoly Service
The Federal Antimonopoly Service of Russia, FAS is the federal-level executive governmental organ which controls the execution of the competition laws and related areas. It was established by the Decree of President of Russia # 314 by March 9, 2004. It is headed by Igor Artemyev...
.
In early December, the Russian state-controlled gas monopoly Gazprom
Gazprom
Open Joint Stock Company Gazprom is the largest extractor of natural gas in the world and the largest Russian company. Its headquarters are in Cheryomushki District, South-Western Administrative Okrug, Moscow...
submitted an application to participate in the auction through its wholly owned subsidiary, Gazpromneft
Gazpromneft
This article is about a former subsidiary of Gazprom. For the current oil arm of Gazprom, see Gazprom Neft.Invest Union is a Russian company based in St. Petersburg and a former subsidiary of Gazprom...
. Gazpromneft
Gazpromneft
This article is about a former subsidiary of Gazprom. For the current oil arm of Gazprom, see Gazprom Neft.Invest Union is a Russian company based in St. Petersburg and a former subsidiary of Gazprom...
had been created in September 2004 in preparation for a planned merger between Gazprom
Gazprom
Open Joint Stock Company Gazprom is the largest extractor of natural gas in the world and the largest Russian company. Its headquarters are in Cheryomushki District, South-Western Administrative Okrug, Moscow...
and state-owned Rosneft
Rosneft
Rosneft is an integrated oil company majority owned by the Government of Russia. Rosneft is headquartered in Moscow’s Balchug district near the Kremlin, across the Moskva river...
.
On December 15, 2004, Yukos filed for a bankruptcy protection in a Houston court, and obtained a temporary injunction prohibiting Gazprom
Gazprom
Open Joint Stock Company Gazprom is the largest extractor of natural gas in the world and the largest Russian company. Its headquarters are in Cheryomushki District, South-Western Administrative Okrug, Moscow...
from participating in the auction. On the next day, December 16, a group of Western banks withdrew their financial support for the Gazprom
Gazprom
Open Joint Stock Company Gazprom is the largest extractor of natural gas in the world and the largest Russian company. Its headquarters are in Cheryomushki District, South-Western Administrative Okrug, Moscow...
application. On the same day, the previously unknown Baikalfinansgrup applied to participate in the auction.
On December 19, 2004, only two companies appeared for the auction: Gazpromneft
Gazpromneft
This article is about a former subsidiary of Gazprom. For the current oil arm of Gazprom, see Gazprom Neft.Invest Union is a Russian company based in St. Petersburg and a former subsidiary of Gazprom...
and Baikalfinansgrup. Gazpromneft
Gazpromneft
This article is about a former subsidiary of Gazprom. For the current oil arm of Gazprom, see Gazprom Neft.Invest Union is a Russian company based in St. Petersburg and a former subsidiary of Gazprom...
declined to place any offer, thus allowing Baikalfinansgrup to acquire Yuganskneftegaz on its first bid.
Four days later Baikalfinansgrup was acquired by Rosneft. Rosneft later disclosed it its annual financial statement that it had financed the acquisition of Yuganskneftegazhttp://www.rosneft.com/english/company/GAAP2004_english.pdf. At the time, Rosneft president Sergey Bogdanchikov
Sergey Bogdanchikov
Sergey Mikhailovich Bogdanchikov is a Russian manager.He received a degree from Buguruslansky Gas Technicum in 1976. In 1981, Mr Bogdanchikov earned a PhD from Ufa Gas Institute....
was also the CEO of Gazpromneft
Gazpromneft
This article is about a former subsidiary of Gazprom. For the current oil arm of Gazprom, see Gazprom Neft.Invest Union is a Russian company based in St. Petersburg and a former subsidiary of Gazprom...
http://www.kommersant.com/page.asp?idr=500&id=-2970.
Shortly after the auction, the planned merger between Gazprom and Rosneft merger was called off, and Sergey Bogdanchikov resigned his post as CEO of Gazpromneft.
On February 7, 2006, in response to a question by a Spanish journalist, Russian President Vladimir Putin
Vladimir Putin
Vladimir Vladimirovich Putin served as the second President of the Russian Federation and is the current Prime Minister of Russia, as well as chairman of United Russia and Chairman of the Council of Ministers of the Union of Russia and Belarus. He became acting President on 31 December 1999, when...
disclosed that Rosneft had used Baikalfinansgrup as a vehicle to acquire Yuganskneftegaz
Yuganskneftegaz
Yuganskneftegaz is a wholly integrated subsidiary of Rosneft that owns and operates the second largest oil production complex in Russia. It was formerly the most important production subsidiary of Yukos, but was expropriated by the Russian government and given to Rosneft, a state-owned...
in order to protect itself against litigation riskshttp://www.kremlin.ru/appears/2006/02/07/1759_type63379_101129.shtml.