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#13 - JRL 9076 - JRL Home
RUSSIA TO ESTABLISH NEW STATE-RUN OIL COMPANY

MOSCOW, March 3. (RIA Novosti)-Yesterday, Alexei Miller, Gazprom's board chairman, and Sergei Bogdanchikov, the Rosneft president, announced that a merger between their two companies had been approved, Vedomosti reports.

The entire Rosneft stock will be exchanged for 10.7% of Gazprom shares. Rosneft will become the natural gas monopolist's main oil-production unit. Rosneft-controlled Yuganskneftegaz, which produces 13% of Russia's oil, will become an independent state-run company, with Mr. Bogdanchikov installed as chief executive officer.

The Russian leadership has sanctioned the conversion of Yuganskneftegaz into a state-run company, a source close to the Kremlin said. "This move aims to eliminate uncertainty and to stop the Gazprom-Rosneft struggle for Yugansk," he said.

The government official said the Kremlin had decided to make this move after receiving US President George Bush's political support at the Bratislava summit and after a US court threw out a Yukos lawsuit.

The outcome of the Yuganskneftegaz affair is a victory for deputy presidential-administration chief Igor Sechin and the Rosneft board chairman, the source said. He added that Mr. Sechin would chair the Yugansk board of directors.

The state will acquire Yuganskneftegaz with the loans that were received to purchase it. Yelena Anankina, an S&P analyst, estimates the debts will total $9 billion. Rosneft had to borrow $7.6 billion, while Yuganskneftegaz owes $1.4 billion to banks as security for Yukos. The company also has tax arrears of $5.1 billion.

The source close to the Kremlin believes that the debts can be repaid by selling minority stock to foreign and Russian applicants. "It would be better to sell large, albeit not blocking, 20% stakes," he suggested.

Analysts believe Mr. Bogdanchikov can establish a large entity comprising other Yukos assets on the basis of Yuganskneftegaz.

Yuganskneftegaz, which was Yukos's main production unit, produced 51.8 million tons of oil last year. This company was auctioned off in December 2004 for $9.35 billion to cover Yukos's debts.