And so it ended. Not with a bang; nor with a whimper; but with a startled "Huh?!" heard 'round the world. On Sunday, Russia's tax police followed through with their (death) threat to auction off the core subsidiary responsible for two-thirds of YUKOS' (OTC BB: YUKOY) oil production. But the buyer was not the "only company likely to bid" we had been hearing about over the past few weeks. In fact, that company -- Gazprom (OTC BB: OGZPF) -- didn't bid at all.
(Not that it could, of course. Last week's U.S. Bankruptcy Court order enjoining Russia from selling Yuganskneftegaz had scared off Gazprom's financiers. International banks such as J.P.Morgan Chase (NYSE: JPM ) , ABN AMRO (NYSE: ABN ) , and Deutsche Bank (NYSE: DB ) , which were part of the financing team, had no desire to side with the Russians if it meant falling afoul of the courts in the U.S., where they do much more business.)
In the end, it was a heretofore unknown company by the name of BaikalFinansGroup that placed the winning (and only) $9.3 billion bid for Yuganskneftegaz ($500 million over the minimum bid). So who is BaikalFinansGroup, and how did it manage to accumulate, over the course of two or three days, sufficient cash to finance its bid -- cash that Gazprom, the world's largest natural gas producer, was unable to raise?
No one knows. BaikalFinansGroup is apparently registered in the city of Tver, Russia, as being located in a building that now houses a grocery store, a cell phone store, and a cafe.
But ultimately, BaikalFinansGroup's true identity doesn't really matter. The company is almost certainly a shell corporation, pre-set up on paper, and then put in storage until needed (hence the legal term of art for these things: "special purpose vehicles"). Some analysts speculate that the company is a front for Gazprom itself. But even if that's true, hiding its identity would still leave Gazprom with the problem of being unable to finance its purchase.
In this regard, a comment by the Russian government soon after the auction ended is telling. A Justice Ministry spokesman declared that if within two weeks this no-name company was unable to produce the $10 billion cash needed to pay for its Christmas purchase, Russia would simply seize Yuganskneftegaz itself as partial payment of YUKOS' $27.5 billion tax debt.
What an elegant solution! It's a wonder the Kremlin didn't think of that one sooner.
Or perhaps it was the real plan all along.
Read all about YUKOS' tribulations in:
Fool contributor
Rich Smith
has no position in any company mentioned in this article.
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