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Mr. Moneybags
// Sergey Bogdanchikov makes plans for YUKOS property
Economic Subjects
Russian President Vladimir Putin congratulated Kazakh President Nursultan Nazarbaev on his 65th birthday (not years in power yet) yesterday in Astana, the capital of Kazakhstan, and, after honoring several signing ceremonies for protocols and memoranda with his presence, flew away to Gleneagle, Scotland, for the G8 summit. Kommersant special correspondent Andrey Kolesnikov, hot on his heels, spoke with Sergey Bogdanchikov, head of Rosneft, before his flight and came to the conclusion that, in his soul, he already considers the 20 percent of Sibneft stock belonging to YUKOS his own.. Thanks to that stock, Rosneft may become the co-owner of Sibneft.
Fairly early in the morning, Russian Minister of Industry and Energy Viktor Khristenko was in the presidential palace in Astana. There was more than an hour before the departure of Putin. Khristenko was in a hurry. At a meeting between Putin and Nazabaev the day before, Nazarbaev had proposed that he reach agreements overnight with his Kazakh colleagues on developing the Kurmangazy oil and gas field and on establishing a joint enterprise out of the Ekibastuz-2 electric power plant, the Russian share in which was to be the payment of Kazakhstan's debts to Russia. Both of those agreements had been in doubt as of the evening before. Both sides had ambitions (practically imperial). Khristenko told the presidents that he would “try to regulate the subject” over night.
That morning, as often happens, his promise seemed ill-advised.
“So what happened?” I asked him as he entered the presidential palace. “Did you regulate the subject over night?”
“The night is not over yet!” he answered briskly and added that he will try to work on it some more.
That is, he didn't regulate it
Kazakh First Deputy Minister of Energy and Natural Resources Baktokozha Izmukhambetov looked much more pleased. He was absolutely satisfied that the main agreement, the one on the division of production structure at the Kurmangazy field was going to be signed. The deputy minister explained that production at the field would begin in seven or eight, ten at most, years, that extractable reserves are 98 million tons, that $23 billion will be invested n it in the course of 55 years and that the budget of Kazakhstan, he was convinced, would receive $30 billion from the deal inn the next 45 years. Nearby, Head of the Rosneft company Sergey Bogdanchikov was sitting and listening glumly to the happy Kazakh as he waited for his turn to sign the agreement. He confessed that he was bored and would even rather answer questions for a reporter than “just sit” (the implication being that he was unused to sitting and doing nothing).
“We don't even know yet for sure what kind of strata are there,” he said, sharing his pain. “There are strata of various ages. And then it is good if there is oil in every stratum and every layer. That is easy oil. That is pleasant. But maybe there is oil only in one stratum and in another gas. Or only gas in both strata.”
“When there are no fish, catch crabs” Bogdanchikov said
They asked him the same questions as they asked Izmukhambetov: how much investment will the field need for 55 years?
“I think $15 billion,” he said with a shrug. The question clearly didn't worry him.
“You colleague says $23 billion. That's a big difference.”
“One and a half times,” he answered instantly.
He was sure that his company would have no problems, which was strange, since his company has a well publicized debt of $22 billion.
“Maybe it's true that you have designs on Sibneft too? Are you planning on acquiring it?”
“I read all that,” Bogdanchikov said. “They just sent me a digest for the last two days. I read that we are buying Sibneft. It wasn't very interesting.”
“You're not interested in reading about yourself! Probably you just know it all already.”
“I know,” he said unexpectedly.
“Tell me.”
“I can say the following: We have any debts.”
That confession was not difficult for the company head to make, judging from his easy, even cheerful manner.
“What are you going to do?”
“Pay them!” he answered confidently. “We just paid half a billion. We'll pay another half billion before the end of the year.”
“What about Sibneft?”
“Rosneft does not intend to increase its credit portfolio,” he said. “Make your own conclusions. But we only really need loans of three or four billion.”
“But now it's 22 billion.”
“We plan to pay it down to three or four billion by the end of 2006 or in 2007,” he explained.
“And until then you won't get into anything new?”
“We will,” Bogdanchikov said forcefully.
“But you don't intend to invest?”
He nodded.
“Well, I already said…”
“Maybe you are counting on them giving you Sibneft for debts?”
“Whose debts?”
“YUKOS's”
“What?”
It was odd having to remind him of things that he knew much more about than I did.
“You have a special relationship with YUKOS and a large package of Sibnet belongs to YUKOS.”
“Yes, we seized a few dozen YUKOS enterprises. They're ours, to put it straight.”
“And what percentage of Sibneft is there?”
“Twenty,” he answered. “Of course we seized it. Otherwise they will sell their property ad that will be all. Let them return what they want. They want to return cash. They don't want to return stock.”
“Where do they have cash from?”
“They have everything,” Bogdanchikov said with assurance. “You don't know how they paid taxes.”
“Everyone paid that way. You too, probably.”
“I could get offended by that! Take the tax articles. How much taxes we paid per ton! How much we paid and how much Surgut [i.e., Surgutneftegaz] paid, and compare. But I know that you are writing how good Sibneft is, flush, transparent…”
“So you seized 20 percent. Do don't plan to take the rest?”
“Sure,” he said. “YUKOS owns 20 percent of Sibneft and we seized it. We considered the sale of Tomsk [Tomskneftegaz], Samara [Samaraneftegaz], plants, the market… And we seized about 180 enterprises in Russia.”
“And abroad?”
“Nothing. We didn't seize anything abroad,” he said bitterly. “I don't know where to look. But there are 180. And they are profitable. We are thrifty. That's why we ended last year with a good profit.”
What do you see for the future?”
“When we become stockholders, we will use that 20 percent.”
“Stockholders in Sibneft? Are you sure that that is what has been decided?”
“It's not decided about the 20 percent,” he smiled as he shook his head. “An appeals court has yet to rule on the seizure of the stock. Maybe, I repeat, YUKOS is prepared to pay that three and a half billion they pilfered from us.”
It was not completely clear that Bogdanchikov did not believe in that turn of events.
“In any case, it has become clear that you do not plan to buy Sibneft with cash,” I said.
“I told you that from the very beginning,” he repeated.
A few minutes later, Presidents Putin and Nazarbaev appeared in the foyer of the palace. They gave a quick glance to a model of yet another building of the century to go up in Astana, the Pyramids of Peace. Nazarbaev plans to start it soon and finish it next year. In one building there will be an opera, university and shops. Nothing is sacred any more to the builders of Astana.
Then it took several minutes to sign three documents. The agreement signed on the Ekibastuz-2 power plant was not conciliated. There was a clause in it that mentioned “the unregulated debt of regional electric companies of the Republic of Kazakhstan to RAO UES of Russia.” Those companies were given three months to make a conciliated proposal on the regulation of their debt in full. That debt was listed as the Russian share in the joint enterprise.
An agreement on dividing the production of the Kurmangazy field was signed as was a memorandum on cooperation between Kazakhstan and Russia in energy.
The presidents had agreed in advance that they would not say anything about the agreements they were signing. Alas, that was the hardest agreement to implement. Before the ink was even dry, Nazarbaev started.
“Major projects have been signed, which have great material value!” he cried out, since there was no microphone.
“Investment in Kurmangazy will reach $22-23 billion,” Putin then added, mentioning the figures set by the Kazakh deputy minister, not those of the head of Rosneft.
“And the profit will be twice as much,” the birthday boy chimed in.
“Fifty percent more,” Putin said with a cough. “And in the Ekibastuz electric plant, investment will be $200-250 million! They worked eight years on it!”
Putin looked as happy as though that information were a birthday present for Nazarbaev.
The agreement between Rosneft and Kazmunaigaz on the development of the Kurmangazy field was not signed.
But it's not important any longer. Now there's Sibneft on the horizon.
Andrey Kolesnikov
All the Article in Russian as of July 07, 2005
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