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Yukos Presents Optimistic Picture for its Future - 2004-02-10


The head of Russia's largest oil company, Yukos, has presented an optimistic picture about its future and the prospects for Russia's oil industry, despite recent tension with the government. The executive also urged the international community to welcome Russia into international trade organizations.

Yukos Chief Executive Officer, Simon Kukes, refused to comment on the fate of the company's largest shareholder, Mikhail Khordorkovsky. Mr. Khordorkovsky is in jail awaiting trial on fraud and tax evasion charges in a case viewed by many observers as politically motivated. Last week, another shareholder was convicted of tax evasion and received a suspended sentence.

Instead, Mr. Kukes, a Russian-born American citizen, said he improved the management of the company when he fired another major Yukos shareholder last week. "So right now we are practically the only Russian company run by independent management and an independent board of directors. Most of the others have shareholders running the company, major shareholders. So the situation is quite novel," he said.

Mr. Kukes made his remarks in a question and answer session at the private Council on Foreign Relations in New York.

He said he expects an increase in taxes, as Russia revises the taxation and licensing system of its energy industry, but he does not believe the changes will be crippling. He predicts that Russia will surpass Saudi Arabia in its production of crude oil in five years. "I see Russia to become the number one producer of crude, if you take gas and oil it is number one, by 2009. I think by that time they will by-pass Saudi [Arabia]. The growth last year was 11 percent, this year will be maybe nine, Russia is approaching nine million barrels a day crude production," he said.

But Mr. Kukes says for Russia to become a "big" international "player," groups such as the World Trade Organization must drop conditions for Russian participation. "This is my wishful thinking. If you want to see Russia [become] as part of the Western community, maybe we should overcome that 'look down attitude'," he said.

Mr. Kukes, who worked for years in the U.S. oil industry, says he does not believe that changes in Russia's taxation system will create new barriers for foreign investors either. He says Western expertise is needed for off-shore oil and gas technology.

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