You've got to hand it to LUKOIL (Pink Sheets: LUKOY.PK). Not only has the Russian oil major and ConocoPhillips (NYSE:COP) partner reported yet another stellar quarter of profits buoyed by record-breaking worldwide oil prices, but it has also demonstrated serious political and business acumen.

First, the numbers. In its report on operations over the first half of 2005, LUKOIL announced a 66% rise in revenues over the year-ago period and a 53% increase in net profits. Disappointing, you say? You think that in an era of gusher oil profits, the company should be growing its profits faster than it does its revenues?

Then Foolish minds think alike -- so do I. However, the company's inability to keep profits growing as fast as revenues is, in this case, honestly not LUKOIL's fault. Because as profitable as the company might like to be, Mother Russia wants to be more profitable still. And since the state is the one controlling the tax machinery, it's able to skim as much as it likes off the top of LUKOIL's profits. Overall, the first half of 2005 has seen LUKOIL forced to fork over $7 billion in non-income taxes to the government -- a 100% increase over last year. And that's before you even get to the income taxes, which added another $1 billion to the company's tax bill. In all, the Russian taxman took a 33.8% bite out of LUKOIL's revenues year-to-date, in comparison to last year's 28.8%.

Now, on to the story of LUKOIL's cleverness. As anyone who's filled up a gas tank lately knows, gasoline prices are on the rise -- and that's true the world over. In France, for instance, where gas prices hit $7 in recent weeks, Motley Fool Income Investor pick Total (NYSE:TOT) cut its price at the pump in response to government threats to levy excess profits taxes on the company. And in Russia, the Kremlin has also called on oil companies to cap gas prices. LUKOIL was the first Russian company to accede to that request -- scoring brownie points with Tsar Putin.

Meanwhile, LUKOIL is perhaps the company best able to accede to the request and preserve its profits regardless. Remember, through its recent U.S. buying spree, LUKOIL has taken control of roughly 2,100 U.S. gas stations. Thus, it has an outlet to sell gasoline at higher prices than it's able to in Russia and still keep its profits gushing.

Read more about how LUKOIL managed to put itself in this catbird seat by clicking here:

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Fool contributor Rich Smith does not own shares in any company mentioned above.