Moscow, U.S. court move to block Mazeikiu deal, PKN Orlen offers record-high price

  • 2006-04-19
  • By TBT staff

UPPING THE ANTE: PKN Orlen President Igor Chalupec has beat the best bid for the refinery by almost 1 billion dollars.

VILNIUS - The Mazeikiu Nafta saga acquired a sense of international urgency last week, with both the Kremlin and a New York court moving to block any sales of the refinery, which is Lithuania's largest enterprise. Russia's Justice Ministry recently told the Lithuanian government that the sale of any shares in the refinery owned by Yukos should be transferred to Rosneft, the state-owned oil company that in recent weeks has purchased large swathes of Yukos' debts to Western banks.

Yukos owns 53.7 percent of Mazeikiu Nafta, an asset that could be worth over 1 billion euros. Meanwhile, the beleaguered Russian company owes the Russian government several billion dollars in tax arrears.
Prime Minister Algirdas Brazauskas said the government was taking the request seriously. "Naturally we cannot ignore these things," he said in a radio interview, adding that the Russian government's statements aggravated talks between the government and Yukos.
"The interests of certain Russian institutions, to which Yukos is indebted to, are absolutely clear 's the debts to Rosneft and Yuganskneftegaz, a part of Rosneft, exceed $2 billion. They have their interests and claims. The question is how to turn those money flows from London toward Moscow," Brazauskas said.

A Moscow arbitration court, at Rosneft's request, has recently imposed a ban on the sale of any of Yukos' foreign assets. The decision, however, is not valid until approved by a court in Lithuania or the Netherlands, where the Yukos subsidiaries that own Mazeikiu Nafta are domiciled.
Russia's Justice Ministry has asked Lithuanian officials to apply certain restrictions in their negotiations with Yukos on any deal involving the latter's interest in Mazeikiu Nafta. "These restrictions would be aimed at satisfying creditors' interests," Lithuanian Justice Minister Gintautas Buzinskas was quoted as saying.

The minister confirmed that he had received a letter from his Russian counterpart, informing him about the Moscow Arbitration Court's decision to satisfy the demands of Yukos' creditors. Buzinskas explained that Lithuania had not yet taken any action because it was looking into whether the Russian arbitration court's decision falls within the framework of the agreement on legal assistance in civil and criminal matters between the two countries.
Yukos offficials, however, seemed to wave off the Moscow decision. "The shares of Mazeikiu Nafta do not belong to Yukos. Moreover, Yukos is not a nominal holder of the stated shares and does not have any legal authority which would allow it dispose of Mazeikiu Nafta shares," Yukos President Steven Theede said in a statement released April 14.
"Therefore, under the current legislation, the management of Yukos cannot take any actions violating the ruling of the Arbitration Court of Moscow dated March 29, 2006 because the stated shares of Mazeikiu Nafta are not the property of the debtor, Yukos," he said.

Meanwhile, a U.S. court in New York issued a 10-day injunction blocking any sale of shares owned by Theede, who is a U.S. citizen. According to The Moscow Times, the court acted on request of Yukos' outside supervisor, Eduard Rebgun. He told the paper that he filed for bankruptcy protection "to defend creditors and to stop Yukos' assets from being stripped."
Rosneft has already made similar moves in Dutch courts, and last week's decision in the U.S. court system would indicate that the Kremlin is pulling out all stops to ensure it is not left out of any lucrative sale.
Regarding the Mazeikiu Nafta sale, events last week were no less intriguing, as reports surfaced that Poland's PKN Orlen had offered $2.5 billion 's some 2 billion euros 's for 94 percent of Mazeikiu Nafta.

On April 13, PKN Orlen approached Lithuania's government with a proposal to acquire the oil complex. The Polish concern, which has no crude oil production capabilities, offered to first acquire the 40.6 percent stake controlled by the government and the 53.7 percent stake that Lithuania is attempting to buy from Yukos, according to Gazeta Wyborcza, a Polish daily.
PKN Orlen said it also offered the assurances of crude supply and made a proposal concerning the financial contribution to the purchase of controlling interest in Mazeikiu Nafta from Yukos.
The offer came just days after PM Brazauskas said that PKN Orlen would not be able to provide solid assurances for the annual supply of some 10 million tons of crude to the Mazeikiai complex.

The transaction, if completed, would mark the largest foreign investment of PKN Orlen, the daily noted. Until now, the Polish concern mostly invested in the Czech Republic, where it acquired a stake in Unipetrol for 400 million euros.
Brazauskas said he believed that Lithuanian negotiators, who were in Paris last week, would bring home an agreement initialed by Yukos. Should that occur, the government would take the same measure as soon as the government approved the draft and handed over respective authorities to Economy Minister Kestutis Dauksys.
The approval is expected this week.
Until now, KazMunayGaz, the Kazakh state-run oil company, has been seen as the most prospective candidate to take over a controlling stake in Mazeikiu Nafta. The Kazakh company has bid $1.2 billion for the stake and has reportedy agreed to revise it up.