BOFIT Viikkokatsaus / BOFIT Weekly 2018/02

Bashneft, a mid-sized oil company was privatized at the start of the 2000s to the leaders of Bashkortostan. A few years later the company was acquired by business tycoon Vladimir Yevtushenkov, owner of the Sistema conglomerate. In 2014, Bashneft's assets were seized by the government on the premise that the privatisation was illicit. In 2016, the government decided to have a second go at privatisation of Bashneft and it was sold to state-owned Rosneft.

Last spring Rosneft started court cases against Sistema for abuses during its Bashneft ownership. With support from president Putin, the companies finally reached an agreement last month with Sistema paying Rosneft 100 billion rubles (1.4 billion euros) in damages. Sistema is set to receive help to meet its obligations from the state-owned Russian Direct Investment Fund (RDIF). The RDIF and the China Investment Corporation are minority partners in Sistema's children's goods retailer Detsky Mir. Detsky Mir's December share offering was cancelled due to the Sistema court case.

Bashneft's seizure was at the time seen by some to have parallels with the Yukos case and many view also the current case as a negative sign of Russia's business climate. The current court case was actually already second related to Rosneft's Bashneft deal. The former economy minister Alexei Ulyukayev was recently convicted for demanding a bribe from Rosneft CEO Igor Sechin for supporting the deal.