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The Canada Post, August 2001
MOSCOW - A Russian corporate raider, backed by dozens of armed security guards, has won control of a Canadian oil company's bank accounts, triggering fears that as much as $30-million (U.S.) in assets could be removed from the Canadian firm.
The move is another serious blow for Yugraneft, the biggest Canadian-owned oil firm in Russia, which has been reeling from repeated attacks by its Russian minority shareholder, Tyumen Oil Co.
Last month, a local administrator in Siberia decided to give Yugraneft's corporate seal to Tyumen, allowing it to take control of the company's bank accounts and other assets. "It allows them to go to the bank, take the money, and do anything they want," said Alex Rotzang, president of Calgary-based Norex Petroleum Ltd., which says it owns 98 percent of Yugraneft.
On June 29, Tyumen, part of the powerful Alfa Group empire of Moscow, deployed about 20 heavily armed men in a military-style operation to seize Yugraneft's headquarters in the Siberian city of Nizhnevartovsk, citing a court order that the Canadians have disputed. The Russians then dispatched other gunmen to seize Yugraneft's oil field, about 90 kilometres away.
The Canadian embassy in Moscow has sharply protested the takeover, calling it "an illegal confiscation of assets" and "a major negative signal to Canadian and foreign investors."
Norex Petroleum says it rehabilitated the Yugraneft oil field at huge expense in the early 1990s, and it now produces about 10,000 barrels of oil a day. It has been taking legal action to seek about $50-million from Tyumen to compensate for oil deliveries that it says it was never paid for.
However, Tyumen organised a shareholders' meeting last month without any Norex representatives, and appointed its own managers to take control of Yugraneft. The Canadian embassy says the shareholders' meeting was "fraudulent".
After the takeover, Norex obtained a court order to remove the armed men. It also received a letter from a prosecutor who said the shareholders' meeting was illegal.
But Tyumen simply removed one set of security guards and installed a new team. "They have over 1,000 armed men around the city," Rotzang said. "That's more than the police have."
On July 10, Tyumen won its biggest victory when the local administrator gave it control of the Yugraneft corporate seal, allowing the Russians to gain access to about $30-million in the company's bank accounts.
Rotzang calls it robbery. "I feel awful about it," he said. "We showed him all the documents, he knows the local prosecutor's opinion, he promised he wouldn't allow it, and then he turned around and did this."
Other asset-stripping moves could follow. The newly installed manager has already tried to sell Yugraneft oil to Tyumen at about one-third of the normal price. Although the pipeline company refused to sell the oil at the below-market price, after last month's moves, it might have no choice.
Rotzang says he has six lawyers working full-time to send off telegrams of protest and letters of complaint to politicians and officials at every level. "I want this case to be thoroughly investigated by independent judges," Rotzang says. "It shows very strongly the political risks of working in Russia."
Tyumen has a long history of battles with foreign investors, including Canadians. In 1996, it won control of the oil field licences of Vancouver-based Ivanhoe Energy Inc which denounced it as an illegal takeover. Ivanhoe eventually accepted about $29-million in compensation, but analysts said it had invested about $60-million in the project.
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