Watching the World: Mind your step in Ufa

April 18, 2005
I f you happen to be in Ufa next week, try to be a little more circumspect than usual.

If you happen to be in Ufa next week, try to be a little more circumspect than usual. Ufa? That’s the restive capital of the oil-rich Russian republic of Bashkortostan, and some people there plan a protest against the government on May 1.

But Rostislav Murzagulov, a spokesman for Bashkortostan President Murtaza Rakhimov, claims that opposition politicians are paying the protesters. “They have enough money for the protests to go on for a long time,” he said. “The myth of despotism and authoritarianism was created by business groups who want control of the fuel complex.”

Bashkortostan’s oil, gas, and energy sector includes a number of the largest and most successful enterprises in Russia. The region stands unchallenged in the field of oil refining within the Commonwealth of Independent States, and it has the second-largest refining capacity in Europe. Not least, the sector ranks third in the region in terms of oil extraction and has annual revenue of $4-5 billion.

Plum worth picking

That’s a plum worth picking, and it will come as no surprise to learn that Russia’s Supreme Arbitration Court presidium recently ruled that Ufaneftekhim, Ufa Oil Refinery, and Novo-Ufimskii Oil Refinery must pay the federal government roughly 12 billion rubles ($427 million) in underpaid taxes and penalties.

Russia’s Federal Tax Service (FNS) accused the Bashkir companies of failing to pay taxes between April 2001 and January 2002 through agreements with the Bort-M and Korus-Baikonur companies registered in Kazakhstan’s Baikonur offshore zone.

In 2003, the Russian Tax Ministry (MNS) claimed Ufaneftekhim owed 2.2 billion rubles, Ufa Oil Refinery owed 5.8 billion rubles, and Novo-Ufimskii Oil Refinery owed over 4 billion rubles in unpaid taxes and penalties. The companies won three suits against MNS in the Bashkir Arbitration Court, the Bashkir Arbitration Court Appeals Board, and the Ural Federal District Arbitration Court.

In January, though, FNS Bashkir legal department head Artur Kheiretdinov told Russia’s Kommersant-Daily that the amounts owed by the plants may change since the court has ruled that the refineries’ fines must be recounted.

Pressure mounts

Meanwhile, the FNS will hold an audit of Bashneft, Ufaneftekhim, Ufa Oil Refinery, and Novo-Ufimskii Oil Refinery for 2002-04, Interfax reported on Jan. 26, citing an unidentified source. The source commented that “it has been decided to thoroughly look into Bashkortostan.”

Since then, though, events have clearly moved beyond merely looking into the place. Just days before a demonstration in Bashkortostan last week, 220 protesters from Ufa arrived in Moscow armed with a letter signed by 50,000 people and addressed-conveniently enough-to Russian President Vladimir Putin.

There’s a logic to their choice since no elections are held for officials like Rakhimov. As one of the protestors noted, “Only Putin has the right to decide...that is the Russian variant of democracy.” Oh, and by the way, the opposition apparently also handed Putin a list of five men to consider as successors to Rakhimov.