Putin Defends Purchase of Yukos

President Vladimir Putin (search) on Thursday strongly defended the purchase of Yukos oil company (search) assets by a state-owned firm, saying the state was just getting its due in moving to get control of the second largest oil production facility in Russia.

In an apparently secret, no-bid sale, the state-owned Rosneft oil company bought a little known company, BaikalFinansGroup (search), that just days earlier had purchased Yukos' most important production unit, Yuganskneftegaz, for 9.3 billion, half of what foreign auditors say it was worth. The Yuganskneftegaz production unit pumps about 11 percent of Russia's oil.

The deal set the stage for the Kremlin's takeover of the nation's largest oil company following a relentless 18-month official crackdown of Yukos, which supplies about two percent of the world's oil. Putin's deputy chief of staff and longtime confidant, Igor Sechin, serves as Rosneft's chairman of the board.

"Today, the state — using absolutely legal, market mechanisms — is ensuring its interests. I consider this perfectly normal," Putin told reporters at his annual press conference, reminding them of how the oligarchs, or private businessmen, obtained properties at bargain basement prices shortly after the breakup of the Soviet Union in 1991.

"Some market participants got multibillion state assets using different tricks, including some violations of then-existing legislation," Putin said.

By contrast, he said, the 100-percent state-owned Rosneft's purchase of the Yukos stake "was done in absolute conformity with market means."

Mikhail Khodorkovsky, founder of Yukos has been in jail for the last 14 months, and is on trial charged with fraud and tax evasion. Russian authorities say the oil giant owes $28 billion in taxes, and froze its assets.

Putin cast the moves against Yukos as part of efforts to uproot corruption and shady bookkeeping. But Kremlin critics have described it as a political vendetta for Khodorkovsky's political activities and an attempt to gain leverage over the strategically important oil sector.

According to reports, Rosneft gets more than three-quarters of the shares in Yukos' Yuganskneftegaz production unit.

Alexander Stepanenko, spokesman for Rosneft, confirmed the deal to Dow Jones Newswires early Thursday. "The owners of BaikalFinans made us an offer to sell their company, and we took it," Stepanenko said. He would not disclose the purchase price.

No one answered the phones at Rosneft headquarters in Moscow.

A spokesman for Yukos in Houston, where the embattled oil company is seeking U.S. bankruptcy protection, could not confirm the reports, but said the company will pursue actions against anybody who participates or is involved in the sale.

In the past several months, the Russian government had announced it would fold Rosneft into the oil assets of Gazprom and form a new company. Gazprom is also the largest natural gas company in the world, possession one-quarter of the globe's gas reserves.

That new oil firm, called Gazpromneft, had been widely expected to purchase Yuganskneftegaz at Sunday's auction. But Gazpromneft was stopped just days earlier by a U.S. bankruptcy injunction in Houston.

If the Yuganskneftegaz production unit is folded into a Gazprom-Rosneft structure, it would give Gazprom daily oil production capacity of 1.6 million barrels, putting it in the pantheon of some of the world's largest international oil companies, according to the Washington-based consultancy PFC Energy.

Robert Ebel, director of the energy program at the Center for Strategic and International Studies in Washington, said Putin appears to be trying to leverage Russia's vast oil and natural gas resources "to restore Russia as a power among nations."