No case for Moscow to nationalise oil giant: WB
MOSCOW: The uncertainty surrounding the fate of beleaguered Russian oil giant Yukos is weighing on the economy because of the damage to investor confidence, the World Bank said yesterday.
A Moscow court a day earlier backed a claim for $3.4 billion in back taxes against Yukos, opening the way for court bailiffs to seize company assets and threatening Russia’s top oil producer with liquidation. The ruling came two weeks after the fraud and tax evasion trial started of former Yukos chief executive Mikhail Khodorkovsky, Russia’s richest man, whose arrest at gunpoint in October sparked fears of a wider assault against big business.
Despite strong economic growth powered by high oil prices, “the picture is marred by the ongoing uncertainty over the fate of Yukos, leaving the first visible imprints on financial markets and short term capital flows,” the World Bank said in its latest report on Russia.
“Is it a one off? As long as we have no answer to this question, Russia has a problem (of confidence). The key problem is destabilisation,” the bank’s chief economist for Russia, Christof Ruehl, told a news conference.
The year-long campaign against Yukos and its top shareholders is widely seen as a Kremlin effort to crush Khodorkovsky, who had angered President Vladimir Putin with his political opposition and aggressive lobbying of economic interests in parliament.
The tycoon, among a handful of Russian businessmen who amassed their wealth in the early 1990s in dubious privatisations, was estimated to be worth $15.2 billion this year by Forbes magazine.
The Yukos affair has caused alarm among foreign and domestic investors, concerned about growing state interference and the threat to private property rights with most analysts expecting Yukos to end up under effective government control. “It’s a tempting thought to mix private effectiveness and government ownership (of Yukos) but I don’t think renationalisation is a good idea,” said Ruehl.
Nationalising Yukos would be a mistake with damaging consequences for the country's economic prospects, Ruehl said.
He said any assumption of control by the state over Yukos would be bad news, not only for its operations but also for the broader economy.
“The stability which has been so successfully established is being eroded – that is the real problem,” Ruehl said. “If it was done by design, then it is a bad design.”
Addressing his last news conference before ending his Moscow posting, Ruehl said that, however unfairly privatisation might have concentrated wealth in the hands of a few, no case could be made for reversing the process. “Nothing ... gives an argument for renationalisation,” he said. “Government-owned enterprises are worse-performing and more incompetent than private enterprises – whoever owns them.”
Presenting a report on Russia's economy, Ruehl said fast growth was being fuelled by high oil prices and the economy must diversify if President Vladimir Putin’s goal of doubling gross domestic product in 10 years is to be met. The economy grew at a rate of 7.4 per cent in the first five months of this year, and Ruehl noted that – for the first time since 2000 – growth in manufacturing output outpaced resource-based industries.
A closer look at that encouraging development revealed, however, that manufacturing growth was largely fuelled by the oil sector, as output of rail cars for oil transport surged to compensate for a shortage of oil pipeline capacity. Ruehl also highlighted dramatic growth in borrowing, with private sector credit up 28 per cent last year, domestic bond issuance up 170 per cent and Eurobond issuance rising 130 per cent – all records. But he played down concerns that the Russian economy may be overheating. “The level of credit and bond issuance is very low compared to other countries,” he said. – Agencies



photo: The main office building of Russian oil giant Yukos in Moscow. – AFP
Last update on: 1-7-2004