Russia gains control of Bashkortostan firms

The Moscow Arbitration Court Aug. 15 ruled that control of six energy companies in the oil-rich province of Bashkortostan must be handed over to the Russian government.

Eric Watkins
Senior Correspondent

LOS ANGELES, Aug. 17 -- The Moscow Arbitration Court Aug. 15 ruled that control of six energy companies in the oil-rich province of Bashkortostan must be handed over to the Russian government.

The ruling against Agidel-Invest was the last in a series of four lawsuits launched by Russia's Federal Tax Service against the owners of oil assets in the regional republic.

The ruling follows earlier suits against Inzer-Invest, Yuryuzan-Invest, and Ural-Invest, which collectively owned parts of the 24,000 b/d oil producer Bashneft, refineries Novoil, Ufimsky, Ufaorgsintez, and Ufaneftekhim, and fuel retailer Bashkirnefteproduct.

The Bashkortostan administration, which controls the companies, said the ruling of the Moscow court would be appealed. The lawsuits will go to the upper arbitration court on appeal and could go on to the supreme court for arbitration.

Trading in the firms on the Russian stock exchange was suspended in late July and the suspension will likely continue until uncertainty is resolved concerning Bashneft and the other companies.

In a bid to boost state control over the energy industry, Russia has used tax claims and environmental inspections to disrupt many domestic and international oil and gas firms working in the country.

As a result of purported tax or environmental violations, Royal Dutch Shell PLC and BP PLC have had to cede control of major projects, with state-owned Russian firms assuming control.

In the case of the latest ruling, industry observers believe the Federal Tax Service will emerge victorious and that Bashkortostan oil assets will later be acquired by Rosneft or a subsidiary.

Two years ago, it was reported that Bashkortostan's oil industry could be facing trouble following an explosion at the 130,000 b/d Novo-Ufimsk refinery (OGJ, Aug. 1, 2005, p. 29).

Contact Eric Watkins at hippalus@yahoo.com.

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