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Khodorkovsky understood that for Yukos to further boost its position, it would need to at the very least wrest control of the pipeline network away from the Kremlin. Khodorkovsky wanted to build up Yukos' value quickly to sell a huge chunk of it to one of Cheney's Texas oil buddies, reportedly either Exxon or Chevron. The reason this was so important for Khodorkovsky was that, since he essentially stole the company during the loans-for-shares privatization scheme in the 1990s, it meant that his hold on the asset was tenuous. The Kremlin could just steal it back any time, as it later did. But the Kremlin would be loathe to steal a massive asset from Exxon or Chevron.

The thing that everybody forgets is that the deal that Khodorkhovski wanted to do was to merge with Chevron (then without Texaco, i.e. much smaller), which means that Khodo would have owned 25-30% of the merged entity, and would have effective control over one of the American majors. Having a Russian, however firendly he appeared to be, controlling one of their companies, would not have been that comfortable to the Houston crowd, I think.

Just look today how Putin blessed the Arcelor-Severstal merger, which will give Mordashov a 35% stake in the merged entity. The same would have happened to  Yukos-Chevron.

It's not Putin that killed that merger, it's Abramovich, who failed to take over the company when Yukos and Sibneft merged.

Meanwhile, Russia emerged as the world's second-largest oil producer, but not much of that was getting to the US. At an Russia-American oil summit held in Houston in late 2002, an agreement was signed to build a pipeline from the rich oil fields in western Siberia to Murmansk, where it could be easily shipped to the US. The pipeline was to be Russia's first private consortium, and Yukos was essentially going to lead it. This was it, the first big play to free up Russian oil from Kremlin control, and get it to the US.

Oil is fungible. Whether Russian oil actually gets to the US is absolutely irrelevant.

Note also that the Murmansk pipeline was pushed by ALL the private oil companies in Russia, not just Yukos. Lukoil, Sibneft, TNK were in.

The Siloviki saw it as a struggle for Russia's survival and independence (and their own too). If Khodorkovsky, working with the most powerful people in the US (the Cheneys and the Houston oil oligarchs), took control of Russia's resources and its power, it would become little more than an appendage of American capitalism, they believed.

That's bullshit. The siloviki wanted the oil billions for themselves. Of course Khodorkhovski was trying to grab more power, but why on earth would he hand it over to Americans? He played the capitalist game because he was smart enough to see that it increased his wealth by increasing the stock price if his company - but he had absolute control of it, not the Americans.

Today most of Yukos is in Kremlin hands; Putin's power is uncontested; and Khodorkovsky is in jail. The Murmansk pipeline was canceled. Now the Siberian pipelines, secure in Kremlin hands, are taking oil to Asia.

The Siberian pipelines are not taking oil anywhere, because thye don't exist yet. Russia exported more oil to China when Khodo's Yukos was running that business (by rail) than now.

Today, US oil companies have large stakes in Kazakhstan's oil fields. But most of the oil being pumped goes through Transneft lines out of the Russian port in Novorossiisk. America has been battling with Russia to get Kazakhstan to pump its oil through an alternate pipeline, the Baku-Ceyhan pipeline, that goes through Azerbaijan, Georgia and Turkey.

The oil pumped from Kazakhstan by Western oil companies does go to Novorossisk, but it gets there via the CPC - the only pipeline in Russia NOT controlled by Transneft. The Baku-Tbilisi-Ceyhan (BTC) pipeline is not built for Kazakh oil, but for Azeri oil.

In order to secure that pipeline, powerful American oil/politics figures, led by Bush family consigliore James Baker, ingratiated themselves into oil-rich Azerbaijan. Despite that nation's atrocious record on democracy and human rights, in 1996 oil majors like Exxon, Chevron and Amoco, set up the powerful United States Azerbaijan Chamber of Commerce (USACC). Its board members include or included Cheney, Baker, top figures in the oil majors, and top figures in Azerbaijan's government (even crazed war-monger Richard Perle had a place on the board of trustees!).

The task was to get Azerbaijan to agree to the Baku-Ceyhan pipeline, whose stated goal was to ship Caspian oil out of Russia's reach and into the Mediterranean for Western consumption. It worked the pipeline is now operational. And a big event in late 2003 was the key to securing it: Georgia's Rose Revolution.

The BTC pipeline is run by BP, a European oil company (the second most influential member of the oil producing consortium, ACG, was Lukoil, the Russian oil company, which ended up selling out to Japanese companies later on). It spent the 90s fighting against the State Department's interference in the region.

The rose revolution had nothing to do with the BTC, which, by the time the revolution happened, was already contracted and financed. The revolution was more of an inconvenience than anything, as all agreements involving Georgia had to be re-confirmed by the new authorities. They were, but the rose revolution was certainly not needed for the pipeline to go through.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Jun 2nd, 2006 at 04:32:55 PM EST
Having a Russian, however firendly he appeared to be, controlling one of their companies, would not have been that comfortable to the Houston crowd, I think.

Good point.

Just look today how Putin blessed the Arcelor-Severstal merger, which will give Mordashov a 35% stake in the merged entity.  The same would have happened to Yukos-Chevron.

Really?  I thought Mordashov was a friend of Putin's, where as Khodorkovsky wanted his job, or at least didn't want him to have it.

I don't know enough about the rest to comment, but thanks for finally addressing this.

Those who can make you believe absurdities can make you commit atrocities. -Voltaire

by p------- on Fri Jun 2nd, 2006 at 04:43:52 PM EST
[ Parent ]
Your comments seem to me reasonable so I don't agree in details.
First, Severstal IS NOT strategic company, Mordashov controls meagre 17% or about of Russian steel output. Severstal is the 3rd biggest company and will effectively control the biggest European steel maker. I don't know about technologies transfer, does Severstal need some Western technologies and will it get them or won't.
Khodorkovsky case is different, he grabbed Yukos (Strategic ASSET by Putin's words), started to corrupt parliament and promoted independent foreign policy. So Khodorkovsky in control of American oil major was not desirable, it might turned to be effective control of Russian oil resources by American businessman Mikhail Khodorkovsky and nationalization or by other words illegal means would be the only way to strip Khodorkovsky off his assets.
by FarEasterner on Sat Jun 3rd, 2006 at 03:32:18 AM EST
[ Parent ]
I'll stipulate that oil is probably more strategic that steel nowadays (although in terms of export and hard currency income, metals are a significant source for Russia, and metal exports are less easy to control than oil which have to go through the State-controlled pipeline system.

While I'll also agree that Khodorkhovski was a real political threat to Putin, I find is absolutely absurd to describe him as an "American businessman".

He understood what to say to be appreciated by American capitalists, but he certainly did not give them much say in his business, and he was always Russian. And he chose to stay in Russia. He was offered the alternative, by Putin and Abramovich: take a few billion in exchange for Yukos, and leave Russia, or stay and take your chances. He took his chances - and probably knew that he would end where he did.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Jun 3rd, 2006 at 10:06:00 AM EST
[ Parent ]


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