MOSCOW, August 24 (RIA Novosti, political commentator Peter Lavelle). With Gazprom the likely buyer of Sibneft, beating out its arch-rival Rosneft, the question looms of how much it will pay for this major oil asset to the company's core shareholder Roman Abramovich. There is considerable political risk associated with a state-owned company paying billions of dollars to an oligarch.
It must be nice being Roman Abramovich. When other oligarchs tripped up or ran afoul of the authorities, Abramovich was the oligarch everyone turned to for help. First, it was his former partner Boris Berezovsky.
When Berezovsky wore out his welcome with the Kremlin, Abramovich "sorted out" some of the oligarchs' business affairs - making a nice profit in the process.
When Vladimir Gusinsky ran into problems, Abramovich was asked to "sort out" his affairs in much the same way he helped Berezovsky.
When Yukos and Mikhail Khodorkovsky were feeling the full weight of the state against them, Abramovich was allowed to quietly de-merge Sibneft from Yukos - waiting to sell Sibneft to another, more acceptable suitor.
Sibneft's suitors have arrived. After the forced acquisition of Yuganskneftegaz from Yukos in December 2004, the newly created state-owned oil major Rosneft has made clear its intention to expand further. National gas giant Gazprom also has ambitions to become a major player in Russia's oil patch. Now fierce competitors and political foes within the Kremlin, both Gazprom and Rosneft have expressed a strong interest in acquiring Sibneft. Abramovich could not be more delighted.
Judging from the news flow over the past few weeks, it appears that Gazprom has beaten out its rival Rosneft to add Sibneft to its portfolio. With the winner in this contest all but obvious, a politically sensitive issue comes to the fore - will a Kremlin-controlled company actually pay $10-12 billion to a high-profile billionaire oligarch who lavishly spends tens of millions of dollars on an English football club and luxuries only the super-rich can afford? In the wake of the 2000-2004 "Oligarch Wars," is it politically acceptable to buy out an oligarch?
The short answer is yes, but with considerable short-term political downside. Any state-sponsored strong-arm tactics against Abramovich to seize Sibneft would be an unmitigated disaster for Russia's investment case in the wake of the Yukos affair. Additionally, Abramovich wants to sell Sibneft and will probably be open to negotiating a price.
The downside for the authorities is having a state-owned company buy back a former state asset valued at $10-12 billon from an oligarch. This most certainly will create political fallout, provoking a public outcry and emboldening opposition parties - particularly ultra-nationalists.
With both issues in mind, "Operation Abramovich Exit" could play out in the following fashion. Since Abramovich and other Sibneft core shareholders have paid themselves a $2.3 billion dividend for 2004, Gazprom will strongly suggest paying some average price based on market trading over the past few months or an agreed valuation - and certainly not the company's current market value. Since Abramovich wants to sell Sibneft, agreeing to a politically acceptable price should not be a problem.
The sooner Gazprom acquires Sibneft, the better for the Kremlin. With Russia's 2007-2008 election season approaching, buying out Abramovich now will give the Kremlin more time to deal with the political fallout. Additionally, the authorities will be able to spin paying billions to a billionaire as evidence of the state's respect for private property rights - "the days of stealing assets are in the past." This may not be completely convincing to an average Russian who dislikes the oligarchs, but it may do wonders to strengthen Russia's investment case.
Abramovich's exit from Russia's oil patch is a windfall for Gazprom. Yet again, Abramovich is willing to help "sort out" someone else's affair and make a nice profit in the process.
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