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Last updated: May 15, 2007 7:00 pm

Russian oil chief faces charges

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Russian investigators have charged Mikhail Gutseriyev, the head of mid size oil company RussNeft with large scale illegal businesss activity, the Interior Ministry said on Tuesday, in what looked like a new front in a state attack on private oil majors.

The investigative division of the Interior Ministry said in a statement on Tuesday it was charging Mr Gutseriyev with conducting illegal activity as part of an “organized group”, wording strongly reminiscent of charges facing former Yukos chief executive, Mikhail Khodorkovsky, who has been jailed since October 2003 for fraud and tax evasion while his company has been taken over by state-controlled Rosneft.

Mr Gutseriyev, however, on Tuesday denied he had been charged and told Russian reporters he had only been questioned.

News of the charges came just four days after the last major asset belonging to Yukos was sold in a bankruptcy auction on Friday in a symbolic end to what had been Russia’s largest oil major. The government’s legal attack against Yukos has marked a shift toward greater state control of the strategic energy sector. The state’s share of oil output has increased from 28 per cent to more than 50 per cent since the Yukos probe began in 2003.

Rosneft has taken over all of Yukos’ production units and refineries as a result of the bankruptcy selloff over $33bn in back tax demands. One person familiar with the situation said Rosneft, which is chaired by Kremlin deputy chief of staff Igor Sechin, was now eyeing RussNeft too. “The company is extremely ambitious in regard to these assets,” the person said. Rosneft declined to comment on Tuesday evening.

Even smaller independent operators have been under fire recently, prompting some industry observers to predict a new state sweep is underway. Aim-listed Imperial Energy, which has only recently started production at two of its eight fields in Tomsk is under fire from Russia’s environmental watchdog, which claims it has misreported its reserves. The agency, headed by Oleg Mitvol, also opened a broadside yesterday against Urals Energy, another small independent producer, claiming it was in breach of environmental accords.

RussNeft had been the one of the few entities operating in Russia able to somehow purchase pieces of Yukos before it was bankrupted in spite of a freeze on Yukos’ assets. In 2005, RussNeft bought Yukos’ 50 per cent stake in Zapadno-Malobalyk, a Siberian joint venture with Hungary’s MOL. The company became the fastest growing oil major in Russia since its establishment in 2003 by Mr Gutseriyev, a former head of state-owned Slavneft. With the backing of Swiss-based commodities trader Glencore, the company has built up production of 300,000 barrels per day.

Mr Gutseriyev’s ability to buy these assets has long been a mystery in Moscow.

The Interior Ministry launched a tax probe into RussNeft in January this year alleging “large-scale tax evasion.”

People familiar with the situation have suggested that some Kremlin officials have been unhappy with those deals.

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