Sold to a bloke down the pub: Russia's murky auction of an oil giant

Even by the bizarre standards of Russian business life, last week was surreal. No one should be surprised that after forcing Yukos, one of its biggest oil companies, into near bankruptcy by making massive tax demands and jailing its chairman, the Russian government should have ended up in control of Yukos's main asset, Yuganskneftegaz.

However, no one could have predicted the sham of an auction, won by an unknown company which is then bought by another, which just happens to by run by the state. The likely end result is that Yuganskneftegaz will end up being sold to Gazprom, the supposedly private oil and gas giant, which is in fact partly owned by the Kremlin.

For those who are confused, here is a quick explanation. Ever since the head of Yukos, Mikhail Khodorkovsky, went public with his opposition to President Vladimir Putin, the Kremlin has been after him and his company. He was charged with fraud and has been in prison, though his trial is continuing in a Moscow court. Meanwhile, the government is claiming that Yukos owes it about £14bn in back taxes, something the company disputes.

To settle the tax bill, the Kremlin forced the disposal of Yuganskneftegaz, with the sale taking place last Sunday. But a couple of days before the auction, Yukos went to a court in Houston, Texas, declared itself bankrupt and asked for the court's protection. The judge tried to halt the auction, but failed, so instead he put a temporary 10- day injunction on Gazprom, in effect preventing it from entering the auction because its bankers could not fund the deal for fear of angering the American courts.

So the auction takes place - and the winner is a company called Baikal Finance Group. No one has heard of it. And for good reason, because it had been created only a few weeks previously and was based in an office above a bar in a small city 100 miles north of Moscow. Speculation immediately moved from how it could have come up with $9.2bn (£4.8bn) to buy Yugans- kneftegaz to who was behind the company.

Roman Abramovich was mentioned (perhaps because the bar was called "London"). Then the speculation moved to Vladimir Bogdanov, head of Russia's fourth-largest oil company, Surgutneftegaz, on the basis that at the auction Baikal was represented by a woman who worked for him. Mr Bogdanov is a close friend of the President.

Mr Putin added to the speculation by saying the buyers were private individuals in the energy industry and then hinting that Yuganskneftegaz could end up becoming part of a joint venture with the Chinese. But it was all a smokescreen. Because it emerged that Rosneft, the state-owned oil group, had bought all the shares in Baikal.

So what now? Most commentators expect that Rosneft will merge with Gazprom to create an oil and gas behemoth that will be 51 per cent owned by the Russian government. Meanwhile, the court proceedings in Texas could lead to further legal action to try to overturn the sale of Yuganskneftegaz, though this is unlikely to be successful. And Western investors will be given another reason for steering clear of Russia.

The final word, though, goes to Mr Khodorkovsky. Speaking from his cell, he said: "The state has offered itself a wonderful Christmas present."