Essay: YUKOS Oil Company

1. Overview of YUKOS Oil Company and its shareholders.
What was YUKOS?
YUKOS Oil Company ‘ was the largest privately owned (by shareholders via offshore holding company ‘Group MENATEP Company’ registered in Gibraltar) oil company, the fourth largest oil company in the world that produced a million barrels of oil per day (2% of global oil production) http://www.shearman.com/~/media/Files/Yukos/07-Yukos–GML-Background-Note.pdf
1993 ‘ YUKOS Oil Company incorporation:
YUKOS was established in 1993 by Presidential Decree number 1403 dated November 17, 1992 http://base.garant.ru/100297/ and Russian Federation Government Resolution ‘ 354. YUKOS abbreviation was formed using parts of companies` names that originally were included in company – “Yuganskneftegaz” and “Kuybyshevnefteorgsinteza”.
The registered capital of Yukos included controlling stakes of:
‘ “Yuganskneftegaz” oil Company (Western Siberia);
‘ “Kuybyshevnefteorgsinteza” refinery (“Kuibyshev Refinery”, “Syzran Refinery”, “Samaraneftekhimproekt”);
‘ “Novokuibyshevsk’ refinery (Samara area);
‘ eight distribution companies in Central Russia (“Samaranefteproduct”, “Bryansknefteprodukt”, “Lipetsknefteprodukt”, “Or??lnefteprodukt”, “Penzanefteprodukt”, “Tambovnefteproduct”, “Ulyanovsknefteprodukt”, “Voronezhnefteproduct”);
‘ 1 September 1995 ‘ JSC ‘Samaraneftegaz’ (RF Government Decree number 864).;
‘ In 1999 – Eastern Oil Company (“Tomskneft”, Achinsk Refinery);
‘ Angarsk refinery “SIDANCO” was bought by Yukos in 1999
Sergei Muravlenko was the Chairman of the Board of Directors and president of the company. In 2001, Mikhail Khodorkovsky called Muravlenko one of the real owners of the ‘YUKOS’ company. In 2002, the “YUKOS” named Muravlenko as one of the beneficiaries of Group MENATEP Ltd, which owns 61% of shares of “YUKOS”.
Yukos had a holding structure:
– “YUKOS-Moscow” management company (established in 1997);
– JSC “YUKOS EP” managed subsidiaries joint ‘ stock companies that was involved in oil production (established in 1998);
– ZAO “YUKOS RM” managed subsidiaries of companies engaged in oil refining process (established in 1998).
According to The Sunday Times, after Khodorkovsky was arrested in 2003 he transferred his shares to Baron Rothschild (according to some reports, it is 53%) on the basis of the transaction, which they made before his arrest. http://www.washingtontimes.com/news/2003/nov/2/20031102-111400-3720r/
In February 2005 Steven M, Theed became a president where he was until 2006.
1. 1995 ‘ 1996 ‘ YUKOS was privatized:
At 13 of November 1995 State Committee on State Property Management has approved the privatization plan of JSC ‘YUKOS’ Oil Company: 45% of the shares of the company were fixed in the federal property for three years, 33% – to be implemented at an investment tender, 7% – were transferred for subsequent placement in the securities market, 7.96% – to be sold in specialized cash auctions, 7.04% – to be sold to employees of the company. As a result of the mortgage auctions in December 2005 the company has passed from the control of the state under the control of the group “Menatep”. Earlier the government placed $120 million in the bank “MENATEP” for lending state in future. Analysis of the processes of privatization of state property in the Russian Federation for the period 1993-2003 period (the expert-analytical measures) / Team Leader – Chairman of the Accounts Chamber of the Russian Federation Sergei Stepashin. – M .: Olita, 2004.
At 23 of December 1996 state share of “YUKOS” was put up for competition at a starting price of $ 160 million with obligation for winner to invest $ 200 million in it. They were bought by JSC ‘Mont Blanc’ (that belonged to ‘MENATEP’ group for $160.1 million. http://www.budgetrf.ru/Publications/Magazines/recep/1997/1/rcpb199710000firm/rcpb199710000firm000.htm
February 1997:
Meeting of the shareholders of “YUKOS” voted for the merger with the group “Rosprom”.
2000:
“YUKOS” was against Russian oil tax reform that included:
– some taxes cancelation (payment for use of mineral resources, the tax on the reproduction of the mineral resource base and excise duties on crude oil),
– tax on mineral extraction and crude oil export duty fixation establishment as a permanent tax Institute. http://www.kommersant.ru/doc-rss/1639372
2001: Listing of Yukos
2003: The process of mergering between ‘YUKOS’ and ‘Sibneft started but had been not completed because of ‘YUKOS affair’ start.
From this point YUKOS case started. But before going straight to the case we need to find out who were the shareholders in YUKOS.
Who were YUKOS investors?
Group MENATEP Limited (GML) – is a diversified financial holding company (registered in Gibraltar) was established by Mikhail Khodorkovsky http://khodorkovsky.ru/ (who gave up all his interests in GML and YUKOS in 2005) and others in 1997. http://www.kommersant.ru/doc/328768 .
Originally the name of the company was ‘Flaymon Limited’. In October 1997 Khodorkovsky and Lebedev received an agreement from the RF Central Bank for buying shares of ”Flaymon Limited’ for the $ 10 thousand and by December company changed its name to ‘Group Menatep Limited’ with the share capital of 20 million pounds.
5 million shares were devided between shareholders:
Shareholders 1997 2001 2002
Khodorkovsky M. B. 10,5% 9,5% 9,5%
Brydno M. B. 7,75% 7% 7%
Lebedev P. L. 7,75% 7% 7%
Dybov V. M. 7,75% 7% 7%
Nevzlin L.B. 9% 8% 8%
Golybovich 5% 4,5% –
The asset management company in Liechtenstein ??Palmus Foundation?? 50% 50% –
A trust by a citizen of Cyprus Christopher Christie 2% – –
Shahnovsky V. S. – 7% 7%
‘Special Trust Agreement’, Khodorkovsky – – 50%
Others – – 4,5%
Directors: M.B. Khodorkovsky and P.L. Lebedev. http://www.kommersant.ru/doc/329755. After Lebedev was arrested in 2003 Steven Curtis became a director.
GML was the main shareholder of ‘YUKOS’ Oil company. At the same time it owned 100% of shares of ‘Yukos Universal Limited’ company (registered in Man island). ‘Yukos Universal Limited’ owned 100% of shares of ‘Hulley Enterprises Limited’ company (registered in Cyprus). At 2000 ‘Hulley Enterprises Limited’ owned 52% of shares of ‘YUKOS’ and 100% of shares in Cyprus companies : ‘Barion Enterprises Limited’, ‘Kincaid Enterprises Limited’, ‘Cayard Enterprises Limited’, ‘Temerain Enterprises Limites’, ‘Wandsworth Enterprises Limited’.
By 19 June 2002 GML controlled 61% of YUKOS shares, ‘METANEP’ bank http://www.kommersant.ru/doc/330864 and ‘Trust and Investment Bank’. http://www.kommersant.ru/doc/328768, http://www.kommersant.ru/doc/328403.