12/01/2003: 
Fraud & Conspiracy
SIBNEFT SUSPENDS MERGER WITH YUKOS
from Control Risks Group [subscription required]
Oil company Sibneft on 28 November announced that its merger with Yukos had been suspended.
The announcement took observers by surprise and raises serious concerns that the government's crackdown on Yukos CEO Mikhail Khodorkovsky and other core Yukos shareholders will cripple the company or even lead to its dismemberment. President Vladimir Putin has insisted that the authorities do not wish to damage Yukos, but the suspension of the merger is clearly connected to the crackdown on the company. The main processes in the merger have already taken place, meaning that any attempt to demerge YukosSibneft would be highly complex and would negatively affect both companies. The latest developments in the Yukos affair highlight the fact that the actions of the authorities can negatively affect business, even where they claim to wish to minimise that impact. Moreover, the fact that such a major deal can be halted at the last minute, and in such murky circumstances, highlights the fact that the business environment remains unpredictable despite improvements in corporate governance in recent years.
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The Sibneft announcement claimed that the merger had been suspended as a result of a mutual agreement between the two companies, but Yukos later issued its own statement saying that it played no part in the suspension. The announcement was made only minutes before a meeting was to be held with shareholders of both companies to approve the board of directors of the merged company and to change the company's charter. The immediate cause of the suspension appears to be the refusal of Yukos' core shareholders to accept Sibneft's demands for greater management control of YukosSibneft. According to some reports, Sibneft's owners had demanded that Sibneft president Yevgeny Shvidler be made CEO of YukosSibneft in place of Semyon Kukes, and even that former head of the presidential administration Alexander Voloshin be made chairman of the board of directors. When Khodorkovsky and his associates refused to meet these demands, Sibneft called a halt to the merger.The role of the Kremlin
Several Western newspapers have reported that the Kremlin ordered, or at least approved, Sibneft's decision to halt the merger. According to the Sunday Telegraph (UK), Sibneft CEO Roman Abramovich attended a meeting with Putin a few days before the announcement that the merger was suspended. London-based Russian 'oligarch' Boris Berezovsky claims that Abramovich has a special relationship with the Kremlin and is acting on its instructions. Core Yukos shareholder Leonid Nevzlin said on 30 November that Shvidler had telephoned him and said that the presidential administration had insisted that the merger deal must be stopped before 2 December in connection with the 7 December parliamentary elections. When Nevzlin asked Shvidler to explain what he meant, the latter refused to elaborate.
While it cannot be ruled out that the Kremlin is directly behind the latest developments, it is more likely that Sibneft has decided to exploit the problems which Yukos is experiencing by demanding greater management control. Abramovich may have met Putin to discuss the government's likely attitude regarding his planned management changes at YukosSibneft. Sibneft may be justifiably concerned about the terms of the merger deal with Yukos, which was announced in April, because Yukos' market value has since declined substantially as a result of the Kremlin's crackdown.
