RusEnergy

05.09.2006 - MosNews - The owners of what was once Russia's largest private oil company, Yukos, plan to demand more than $50 billion in compensation from the Russian Federation following disintegration of the company. The Times reported on Tuesday, Sept. 5, that Yukos' majority shareholder GML, formerly known as Group Menatep, is bringing the Energy Charter Treaty Claim, the world's largest investment lawsuit, against the Kremlin. The damages being sought were previously estimated at $30 billion, but The Times has learnt that this is to rise to about $50 billion. The case is being heard by the United Nations Commission on International Trade Law in the Hague. Yukos was founded by Mikhail Khodorkovsky in 1993 and acquired vast assets through privatizations that many Russians felt were rigged. The company quickly became a powerhouse comprised of oil refineries, pipelines and oil and gas fields across Central Europe and Russia. When Khodorkovsky started supporting political rivals of Russia's President Vladimir Putin Yukos was hit with massive tax demands and the company's founder was thrown in a Siberian jail. Yukos' core production asset Yuganskneftegaz was confiscated by Russian tax authorities and later sold at a state-run auction for $9.5 billion. It was bought by the state-owned oil company Rosneft, which floated in July at a value of $80 billion. The Energy Charter Treaty Claim is seeking damages from the Russian government and accuses the Kremlin of discriminatory treatment against the company. The previous valuation of damages was based on the value of Yukos when the oil price was $30 a barrel. It has since risen to more than $70. Tim Osborne, a director of GML, said: "We would have sold out of Yukos at this higher price, so when our accountants are finished working out the numbers I think the claim will be closer to $50 billion." GML has attempted to negotiate a settlement with Russia but Osborne says they have received no response. The company has decided to abandon attempts to settle until after next year's general elections, when President Putin is due to step down. "The next big issue is that of jurisdiction, because the Russians claim that they are not bound by the court's findings," Osborne said. "This is clearly not the case, and if we get through this part of the case we think we will win on the substance of our argument." Yukos is now in two parts, with the Russian assets under administration and likely to be sold, probably to Rosneft and Gazprom. The foreign assets are held by a Netherlands-based holding company and these too are being sold off to return cash to GML and pay debts.