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From Russia Without Love

One last persecuted billionaire to cover. Mikhail Khodorkovsky, our friendly neighborhood Russia oligarch. Poor misunderstood Mikhail was only trying to exercise his rights of free speech and demonstrate good citizenship by participating in the political process. As a reward, the Russian government (aka Vladimir Putin) was kind enough to comp Mr. Khodorkovsky room and board at one of their finest prison establishments. A four star property I understand. Kinda like they do in Vegas for the high rollers

The Russia government has also been generous enough to watch over Mikhail's company while he's indisposed. As part of their care-taking role, they are about to seize and sell some of the company's key oil assets to pay Yukos' 2000 tax bill of $3.4 billion. No doubt the government is simply trying to tidy up some accounting loose ends. Nice guys don't you think.

Apparently investors don't think so. They fear the government won't attempt to maximize the return on the sale. Imagine that, a government not maximizing the return on investment. Them Russians still don't get this capitalist thing. Even the idea of taxing an oil company goes against the grain. Ask President Bush. He'll tell you.

The government is contemplating selling Yuganskneftegaz, which accounts for 60% of Yukos' oil production and 70% of its reserves. Some fear they will do so for pennies on the dollar to the government-friendly energy company, Gazprom. If they do in fact sell Yuganskneftegaz merely to cover the $3.4 billion in taxes, that would be the case. Experts value the Yukos subsidiary between $16.7 billion to $30 billion.

You think real estate has appreciated in value. Mikhail bought Yuganskneftegaz for $150 million a decade ago. Me thinks the Russia government is having a delayed bout of seller's remorse.

At this point it's unclear whether the situation will go from bad to worse. There is the potential the Russians will decide to return the country's largest oil company to state control. Stay tuned.
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