MOSCOW: Russia’s state-run oil company Rosneft has won a $2.3bn claim for damages against the private conglomerate Sistema, in a dispute over valuable oil assets that has resurrected fears over the country’s attitude to private ownership. The long-running battle for control of Bashneft, a regional oil producer, has chilled investor sentiment towards the country and drawn comparisons with the Russian state’s investigation and ultimate expropriation of Yukos, the private oil major, more than a decade ago. Rosneft, controlled by Igor Sechin, a former aide to Russian President Vladimir Putin who remains close to the Kremlin, bought Bashneft from the state last year after it was seized from Sistema. Vladimir Yevtushenkov, the conglomerate’s owner, was placed under house arrest. The case has reinforced Mr Sechin’s public reputation as a confrontational and pugnacious business titan, and one of the country’s most powerful figures. “This is an example of Sechin’s broad capabilities and his aggressiveness,” said Vladimir Milov, a former Russian deputy energy minister. “He wants at least a partial ‘refund’ from Mr Yevtushenkov, and uses administrative pressure to achieve that.” Mr Sechin has previously told the FT that he pursued Rosneft’s claim in a correct manner by going to court. In the lawsuit, Rosneft demanded Rbs170.6bn ($2.9bn) in compensation for what it depicted as an illegal reorganisation of Bashneft by Sistema that stripped assets from the company before its privatisation.
Measured by market capitalisation, Bashneft’s value rose under Sistema’s ownership. A regional court in Ufa, in southern Russia, on Wednesday ruled that Sistema should pay Rosneft Rbs136.3bn, after dismissing arguments by Sistema that all the changes made to Bashneft were legal, documented, in line with standard business practice and approved by shareholders. “It is clear that the court has fully accepted the legal position of Rosneft,” Mikhail Leontiev, Rosneft’s spokesman, told news agency Interfax. He added that Rosneft’s lawyers would analyse the judgment and decide whether to appeal for a larger amount of compensation. But Sistema spokesman Sergei Kopytov said: “The entire process has been completely biased, with not even the semblance of any objectivity . . . We think that this ruling will have a significant negative economic impact.” Sistema said it believed “it will ultimately be vindicated by a fair court hearing” as it outlined its own plans for an appeal. “In recognising the losses of Bashneft at Rbs136.3bn, the judge has in effect cast into question the legality of standard corporate procedures,” Mr Kopytov added. “The judge also did not reject the most absurd of the claimants’ demands . . . [and] ignored all of our motions, the opinions of a number of leading economic and legal experts, and declined to commission an independent financial expert assessment.”
Russia’s Central Bank said in a letter to Sistema submitted to the court that some of the corporate actions taken by the conglomerate to reorganise Bashneft were legal and did not violate shareholder rights. International investors who spoke to the FT on condition of anonymity said that the case has contributed to negative investor sentiment towards Russia. Legal protection afforded to private investors is a source of nervousness in an economy with a history of moves by state-controlled companies to seize major assets, particularly in the natural resources sector. The case has echoes of the battle for control of Yukos, a former oil company that, like Bashneft, was assembled from assets privatised after the break-up of the Soviet Union. In 2003 Russia arrested its owner Mikhail Khodorkovsky, then the country’s richest man, and levied huge tax demands against the company, which accounted for one-fifth of Russia’s crude production. Mr Khodorkovsky, a critic of Mr Putin, was jailed in 2005 and released in 2013. After the company fell into bankruptcy, the majority of Yukos’ former units were bought up by Rosneft, today the world’s biggest publicly listed oil company by output and one of the Kremlin’s most important corporate assets. Rosneft’s purchase of Bashneft last October in a controversial privatisation process was initially seen by Russia’s business community as the end of a bitter battle for the group. Investigators ruled in 2014 that the company’s initial privatisation had been illegal, and that Sistema’s ownership was therefore invalid. But the decision to bring the lawsuit against Sistema in May reopened the feud. Mr Sechin has denied that the case is part of a personal vendetta against Mr Yevtushenkov. Shares in Sistema have halved in value since the lawsuit was announced in May. The court hearing the case ordered a freeze on $3bn of assets held by the group, including its majority stake in MTS, Russia’s largest mobile phone operator.