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Last Updated: Tuesday, 27 July, 2004, 16:26 GMT 17:26 UK
Yukos workers face uncertain future
By Damian Grammaticas
BBC Moscow Correspondent in Siberia

Yukos plant in Siberia
The Yukos logo is everywhere.

We're flying a couple of hundred metres above the ground. Our helicopter heads across a vast flat expanse that stretches as far as the eye can see.

Endless green marshes are cut through by myriad river channels, dotted with lakes. Here and there, clumps of fir and birch trees rise out of the muddy wastes.

This is Siberia. The name conjures images. A cold, hostile land. A place of exile. Of gulags and death.

But I am here to see the immense potential this wilderness holds. In the far distance is a tiny bright point of light. Curling into the clear blue sky is line of vapour. It is a flare, burning gas from deep under the ground, a by-product of the pumping of oil.

Empire

Oil is the key to Russia's future. Beneath the Siberian swamps there is enough wealth to transform this country.

The company has done a lot for its workers, for their children
Cargo ship worker Alexei

Russia is now beginning to rival Saudi Arabia to be the world's biggest oil producer. This part of Western Siberia produces half of Russia's oil. Much of it belongs to Yuganksneftegaz, part of the Yukos oil empire.

On the ground we are taken to see Yukos' investments in the Priobskoye oilfield. Everything here has to be built on foundations of sand and concrete that lift it above the marshland, roads, oil wells, pumping stations, storage sites with lines of giant oil tanks.

Heavy trucks rumble along. Here and there men in oil stained uniforms wrestle with steel cables, heaving pipes into place.

Bankruptcy

There is a central hub where the oil workers live and eat. New accommodation blocks have clean rooms with towels carrying the Yukos corporate logo.

Mr Khodorkovsky in prison
Mr Khodorkovsky: Was he seen as a threat?

The logo is everywhere. On flags, on billboards, on worker's overalls. There is a spotlessly clean medical centre, and an efficient canteen.

Yukos is Russia's most profitable oil company. But Russia's authorities say the firm owes billions of dollars in taxes.

Since they have also frozen Yukos' bank accounts, it cannot pay the demands. Now they are planning to seize and sell off Yuganskneftegaz and the Priobskoye oilfield to recover the money.

Without access to its accounts and facing the loss of two-thirds of its oil supplies, Yukos has said it is on the verge of bankruptcy.

Prison

In the canteen the fate of the firm is on everyone's minds. Hardened oil workers are grim-faced.

I think this case, the Yukos case, very seriously generates concern in the international community about stability of property rights, stability of the investment climate.
Mikhail Fridman

"I don't know what is going to happen tomorrow. I don't even know if I am going to have a job," says Vyacheslav who has worked here for 15 years.

His friend Alec nods in agreement. "I'm afraid the company will be sold. I don't know what my salary will be, what benefits we will keep."

The reason Russia's government is relentlessly pursuing Yukos, many believe, lies in a courtroom far away in Moscow. There, sitting in the cage for the accused, is Mikhail Khodorkovsky, Yukos' main shareholder.

His personal fortune was estimated earlier this year at $15bn. He bought Yukos for a knock-down price in Russia's privatisations a decade ago. Now he is accused of tax evasion and fraud.

Property rights

Many believe Mr Khodorkovsky is on trial because President Putin wants to bring down a man who could be potential rival, and bring Russia's oil wealth back under Kremlin control.

Yukos oil installation, Nefteyugansk
Yukos workers worry about the future.

Yukos' fate is also a warning to Russia's other oligarchs, the elite super-rich who snapped up huge chunks of the country's natural resources after the fall of Communism.

Men like Mikhail Fridman, also a billionaire from oil, banking and telecommunications, know they must now must toe the Kremlin's line.

Dressed in a tailored suit, Mr Fridman sits in his smart Moscow offices. Last year he went into a multi-billion pound partnership with Britain's BP oil company.

"I think this case, the Yukos case, very seriously generates concern in the international community about stability of property rights, stability of the investment climate," Mr Fridman says. "That's obvious."

Westernised

The treatment of Yukos has caused concern among investors and businessmen because the authorities seem determined to seize the firm's core components rather than less vital parts.

Yukos office
Yukos' tax bill currently stands at $3.4bn.

Yukos' tax bill currently stands at $3.4bn. Yuganksneftegaz is valued by Yukos at $30bn. And the authorities won't talk to the firm about any alternative settlement.

So many observers believe what is really going on is a ruthless move to seize Mr Khodorkovsky's wealth, to break his nascent political ambition, and to give Yukos' oil fields to owners who are closer to the Kremlin.

There is also concerns that in pursuing Mr Khodorkovsky the authorities may end up splitting apart a company that had turned itself into one of Russia's most modern, westernised firms.

Prosperous

The town of Nefteyugansk, Yukos' main base in Western Siberia, is home to 100,000 people. Before Yukos came, this was a grim Siberian outpost, lines of concrete dormitory blocks dumped on the banks of the River Ob.

No longer.

Mikhail Fridman
Men like Mr Fridman, also a billionaire, know they must now must toe the Kremlin's line

Today, Nefteyugansk has a new sports hall and modern ultrasound equipment in its hospital. Everyone is benefiting from the oil wealth.

Yukos is seen as one of Russia's most progressive companies. In the last couple of years it has begun investing in the local community, trying to show it can be socially responsible.

So people in Nefteyugansk, strolling along streets planted with neat flowerbeds, worry that the punishing of Mr Khodorkovsky will hurt them too.

One woman sitting on a bench in the late evening sunlight says "we hope Yukos keeps on working".

"Our future depends on it. We want everyone to be prosperous."

Nearby, Alexei, who works on a cargo ship that carries supplies up river into the heart of Siberia, says "Yukos' fate will touch us all".

"If it continues being prosperous, we will have a lot of work. The company has done a lot for its workers, for their children."

But it is politicians in far off Moscow who will probably decide if Yukos does go bankrupt in the next few weeks. If it goes under, the effects will be felt far beyond Siberia.

The prosperity of many may be affected. Russia's economy may be hurt. And if exports falter, the already high price of oil worldwide could rise further.


WATCH AND LISTEN
The BBC's Damian Grammaticas
"The Yukos case shows (that) tapping into this wealth can be very risky indeed"



SEE ALSO:
Oil giant Yukos faces dismantling
20 Jul 04  |  Business


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