To the alarm of Washington & Wall Street
Russia breaks U.S. grip on oil company
By Deirdre Griswold
The dreams of U.S. petro-billionaires to gain control of a
large part of Russia's oil and gas production went up in smoke
on Dec. 19. Despite a last-minute attempt by a federal court in
Houston to block it, the Russian government sold a large part
of Yukos Oil, the country's second-largest oil company.
The winning bidder in the forced auction was a previously
unknown Russian company called Baikal Finance Group. Western
and Moscow business sources call it a front for Gazprom,
Russia's largest energy company, which is partly owned by the
government. Baikal agreed to pay $9.3 billion for
Yuganskneftegaz, the core production unit of Yukos.
From Wall Street's point of view, this is a major challenge
to what they feel they won through the Cold War: undisputed
control over the vast wealth of the former Soviet Union. During
the counter-revolution carried through by their
protégé, Boris Yeltsin, the socialist economic
structure inherited from the USSR was broken up. The productive
apparatus and natural resources that had belonged to the Soviet
people as a whole began to be sold to individual owners. Over
the next few years, as capitalism took hold and poverty grew
for the workers, a choice few from the elite became rich owners
of this property, either through widespread theft and
corruption and/or by becoming conduits for foreign capital.
One such person was Mikhail Khodor kovsky, who became the
richest man in Russia after he started the Menatep bank and
then took over as CEO of Yukos Oil in 1996.
Looting Russia in collusion with
imperialism
Khodorkovsky's name came up in 1999 in the United States
during a federal investigation of money laundering by the Bank
of New York and officials of Menatep. (See "NY bank scandal tip
of iceberg: Looting Russia fuels Wall Street boom" by Fred
Goldstein, Workers World, Sept. 23, 1999.) The amount under
investigation was $10 billion, but that was only the tip of the
iceberg as far as the widespread capitalist looting of Russia
was concerned. Russia's Interior Ministry estimated at that
time that "anywhere from $50 billion to $250 billion was
transferred out of the country illegally from 1994 to 1998."
(New York Times, Sept. 5, 1999)
A little over a year ago, Khodorkovsky was jailed by the
Russian government of Vladimir Putin, charged with fraud and
evading $20 billion in taxes. Energy giants in the U.S. like
the Carlyle Group went into panic mode because Khodorkovsky,
not content with becoming a billionaire almost overnight, had
been preparing to sell ExxonMobil a $20-billion stake in
Yukos.
The Bush administration, including officials of the National
Security Council and the U.S. Embassy in Moscow, put heavy
pressure on Moscow to release Khodor kovsky. (Wall St. Journal,
Oct. 31, 2003)
But the head of Yukos remained in jail, making Russia the
only country in the world to keep the richest of all its
citizens behind bars. While some in the West try to present
Khodorkovsky as a martyr, his jailing is extremely popular
among Russian workers.
The Russian government froze the company's assets and
continued with its plan to auction off most of Yukos,
presumably so that it could collect the unpaid taxes.
What happened next made it very clear to the world what this
struggle was all about. The highest level of Yukos's management
was taken over by two U.S. executives, CEO Steven M. Theede and
CFO Bruce K. Misamore.
Houston court tries to block auction
The day before the auction was to take place, a federal
judge in Houston upheld a temporary injunction sought by Misa
more that was supposed to halt the Mos cow auction. It was the
height of imperialist arrogance, but it didn't work. The
auction happened the next day. But the threat of U.S. economic
sanctions against whoever bought the company was enough to
cause Deutsche Bank and three other European banks to freeze
between $10 billion and $13 billion--money they had pledged to
loan Gazprom to make its bid.
An AP report of Dec. 19 said that, "With a big presence in
the United States, the banks could potentially face legal
action if they violated the court order."
Gazprom had retained a U.S. lawyer, Michael Goldberg, for
the Houston proceeding. Goldberg told the media that Gazprom
would not appeal the ruling, because "There is no jurisdiction
in this case, and this is not the type of case that a Texas
court should be deciding about Russian assets."
So the next day, in Moscow, it was not Gaz prom that made
the winning bid for Yukos, but a previously unknown
company--Baikal Finances Group. The Russians had beaten the
U.S. sharks at their own game.
How many U.S. billionaires have set up dummy offshore
corporations in order to conceal their earnings? How many
landlords have created management companies inside other
management companies so tenants won't know where to go with
their complaints? How many corporations have filed bankruptcy
and reorganized under a new name in order to break union
contracts and walk away from pension and healthcare
obligations?
Creating dummy corporations is an old trick that U.S.
companies know all too well. Nevertheless, they are waxing
indignant that Russia would do such a thing.
The AP dispatch raised an even deeper fear gripping Wall
Street: "Yukos management and outside observers say the back
taxes and the jailing of its former CEO Mikhail Khodorkovsky on
fraud and tax evasion charges are aimed at neutralizing
Khodorkovsky's political activities and reasserting state
control over Russia's economically crucial oil industry."
Counter-revolution imploded the economy
The restoration of capitalism in the former Soviet Union
imploded production there. Workers World analyst Sam Marcy at
the time compared what had happened to the cutting up of a huge
ocean liner into little rowboats. What had been a highly
integrated economy guided by a national plan was quickly broken
up into small units competing with one another for markets and
profits. Many factories and other workplaces closed for
good.
The effect on the workers was catastrophic. The very
survival of Russia, even as a capitalist country, was called
into question as foreign capital wormed its way in to pick up
the pieces.
The Putin capitalist government may have decided that it has
no choice but to exert more state control over Russia's natural
resources. However, nationalization by a bourgeois government
does not equal socialism, not by a long shot. Neverthe less,
the reaction of Wall Street and the Bush administration is
likely to be harsh.
The day after the auction, Putin went to U.S. capital's old
rival, Germany, where he gave a press conference defending his
government's sale of Yukos as legal and constitutional. He also
indicated that Russia and China would be cooperating on
building an oil pipeline. This is not new; even under
Khodorkovsky, Yukos was in discussions with the China National
Petroleum Corp. on a major oil pipeline from Eastern Siberia to
China.
At that time the governments of Russia and China probably
both worried about handing such a strategic project to a
company so obviously in the pocket of the U.S. Now the worries
will be coming from Washington.
For more background to this story, search for
"Yukos" at www.workers.org.
Reprinted from the Dec. 30, 2004, issue of
Workers World newspaper
This article is copyright under a Creative
Commons License.
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