EU investors urged to turn from Russia to Ukraine

Date: 31/03/05

Jerzy Buzek, former Polish prime minister, has called for European investors to turn their €2.2 billion annual investments in Russia towards neighbouring Ukraine.

Buzek, now a member of the European Parliament for the centre-right European People's Party (EPP-ED), said that after Moscow's actions against oil giant Yukos and its former CEO Mikhail Khodorkovsky, European investments might better be placed in a reformed Ukraine.

"Perhaps it would be more secure for our investors to go to Ukraine," said Buzek.

Buzek compared the current situation in Russia to that of the rouble crisis of the late 1990s. "We lost around €70bn in 1998, we lost it completely and now it just starts again," he said. "The Russia of President Vladimir Putin is very different to the Russia of president [Boris] Yeltsin. We may have had differences with Russia in the 1990s but we realised it was going towards our values, in general."

His comments come as Russian Economics Minister German Gref announced that key Yukos asset Yuganskneftegas - which produces more oil per day than Qatar and which was sold off at a cut price last year - will become a separate state-run firm.

"It is the re-nationalisation of Yukos," said Buzek, adding that the case was meant to be "an example for Russia's oligarchs".

"Yukos was a hard partner for President Putin, Mr Khordokovsky was arguing and did not agree with everything Putin said."

Yuganskneftegas was bought by a previously unknown company which was later snapped up by state oil company Rosneft.

But Gref announced recently that a planned merger between Rosneft and Gazprom, which is 38% owned by the Russian government, would not include the Yuganskneftegas unit.

Sources close to Yukos said the move highlights Russian concerns over legal challenges against the owners of Yuganskneftegas from European and other investors.

"It is a hot potato. Whoever holds it is certain to run into trouble so they are trying to invent different forms of property," said the source.

Emmanuel Gaillard, a lawyer for Menatep, Yukos' main shareholder, said the move would not adversely affect the case of EU investors seeking to recoup their losses under multilateral investment rules.

He said that UK-based investors might be considering filing a separate case against the Russian government under a bilateral UK-Russia treaty.

The estimated market capitalisation of Yukos shares held by European investors before the arrest of Khordokovsky is thought to be €6bn.

Jerzy Buzek, former Polish Prime Minister and now a member of the European Parliament for the centre-right European People's Party (EPP-ED), called for European investors to turn their €2.2 billion annual investments in Russia towards neighbouring Ukraine. Buzek said that after Moscow's actions against oil giant Yukos and its former CEO Mikhail Khodorkovsky, European investments might better be placed in a reformed Ukraine.