ROSNEFT FAILS TO ATTRACT BIDDERS.

There was more bad news for the Russian government yesterday when it became apparent that Rosneft, the last major Russian oil company still in state hands, has failed to attract any buyers. Yesterday was the deadline for the submission of bids for 75 percent of the shares plus one. Russian Prime Minister Sergei Kirienko told journalists yesterday that, since no bids had been received by the time the deadline expired, the auction would be declared invalid. A new contest will be announced on May 30 or June 1, Kirienko said. (Itar-Tass, ORT, May 26)

This is a major embarrassment for the government, which last March fixed the starting price at US$2.1 billion. Although there was no shortage of buyers interested in purchasing the company, all the major corporate contenders complained that the price was too high. US$1.8 billion, they said, would be a more realistic price. The government dismissed these complaints, saying buyers were just trying to bid the price down.

Kirienko yesterday blamed the world fall in oil prices which, he said, meant that no Russian oil company has disposable cash at present. He said that the government would revalue Rosneft and announce a new auction with a revised starting price but that the other conditions of the tender would remain unchanged.

Financially, failure to find a purchaser is a serious blow for Russia’s cash-strapped government, which is in acute need of funds. It has already included projected revenue from the Rosneft sale in its 1998 budget. In recent days reports have circulated that Russia’s giant Gazprom remains interested in buying the oil company. But Gazprom, which had formed a consortium for the purpose with LUKoil and Royal Dutch/Shell, shared the view of the rival consortium, put together by Oneksimbank and British Petroleum, that the price the government was asking was too high. The government, which owns 40 percent of Gazprom, has been putting pressure on Gazprom to bid for Rosneft. (Financial Times, May 25) A third consortium that had been expected to bid for Rosneft–the Yukos and Sibneft oil companies–is in confusion following the announcement earlier this week that plans to merge the two companies have fallen through. (RTR, May 25) The new conglomerate, Yuksi, was to have been the largest oil company in the world as measured by proven reserves, and the third largest by output (after Exxon and Shell). Talks over the formation of Yuksi are now said to have been postponed till the end of the year.

NORWAY’S KING IN MOSCOW.