Putin claims the right to re-nationalise Yukos

By Arkady Ostrovsky in Moscow

Financial Times

Published: December 24 2004

The Russian president on Thursday hit out at the flawed privatisations of the early 1990s and argued that the state had every right to make amends by re-nationalising Yukos's core assets.

Speaking at a three-hour press-conference in the Kremlin, Vladimir Putin said: “You all know very well how privatisation took place here in the early 1990s and how, using various tricks, and sometimes violating the laws, many market participants got hold of state property worth many billions [of dollars].

“Today the state, using absolutely legal market mechanism, is securing its interest. I consider this to be quite normal.”

Mr Putin has previously insisted that Yukos was pursued because of its failure to pay its taxes. But Thursday's statement provided a new justification for the Yukos saga one that could equally apply to other companies created by the privatisations of the 1990s.

Late on Wednesday night Rosneft the state oil company chaired by the deputy chief of Mr Putin's administration took control of Yugankneftegas, Yukos's main production asset accounting for 11 per cent of all Russian oil production.

Rosneft, which paid only $9.35bn for the oil producer, far less than its market value, is merging with Gazprom to create a giant national company.

A combative Mr Putin also ridiculed the decision of the Houston court that issued an injunction last week against the sale of any of Yukos's assets, after the company had filed for bankruptcy protection in the US.

Mr Putin said the ruling issued by a US judge, “who probably does not know where Russia is”, raised questions about the competence of the Texas court.

He said the judgement was an example of the US's attempt to dominate the world and typified its double-standards towards Russia.

In one of a series of angry outbursts aimed at the US and the west, Mr Putin lashed out at criticism of Russia's role in Ukraine. “An intention to limit Russia's opportunities for developing relations with its neighbours . . . amounts to a wish to isolate the Russian Federation,” he said.

He also criticised Poland's president Alexander Kwasniewsky for interfering in relations between Ukraineand Russia and suggested heshould mind his own business: “I think inside Poland itself there are lots of things to do. Unemployment there runs at 20per cent.” Mr Putin rejected US criticism of the state of democracy and the rule of law in Russia, accusing Washington of intimidating voters and barring observers from polling stations.

“I must say that we are not exactly thrilled by what is happening in the US. Do you think that the electoral system in the US is without flaws? Need I remind you of how elections were held in the US?”

Signalling Russia's determination to be counted as an equal partner to the US, Mr Putin said: “Together with the United States, we are the biggest nuclear power in the world and we have a special responsibility in terms of arms control and non-proliferation of weapons of mass destruction”.