In the run-up to the presidential elections in Bashkiria, a quiet privatization of the local oil industry took place. As auditors from the Accounts Chamber found out, controlling stakes in Bashneft and five other Bashkir petrochemical enterprises with a total turnover of more than $1.5 billion per year came under the control of little-known private firms. The auditors accused the Bashkortostan authorities of embezzling state property and threatened to contact the Prosecutor General's Office.

OJSC Bashneftehim, created in 1993 by decree of the President of Bashkortostan, united the state-owned shares of the Ufa Oil Refinery (74.88%), Novoufimsk Oil Refinery (85.4%), Ufaneftekhim (60.63%), Ufaorgsintez (71.76%) and Bashkirnefteproduct (57.4%). In 1999, the Ministry of Property of Bashkortostan contributed 93.4% of the shares of Bashneftehim to a new fuel holding company, JSC Bashkir Fuel Company (BTK), which also included the state-owned shares of Bashneft (63.72%) and Bashkirenergo (32%). Bashneft produces about 12 million tons of oil per year; the company's revenue for 2002 was $1.3 billion, net profit - $184 million.

In August last year, Bashkortostan President Murtaza Rakhimov allowed the Bashkir Fuel Company (BTK) and Bashneftehim to sell shares in fuel and energy companies that they owned. Analysts predicted that competition for the Bashkir oil industry would be very tough, since the largest Russian companies - LUKOIL, Tyumen Oil Company (TNK), Tatneft and Surgutneftegaz - had shown interest in it.

However, since then, the auction for the sale of shares in Bashneft and local oil refineries has not been announced, and rumors have spread across the market that these enterprises will be quietly privatized in favor of Bashkir entrepreneurs close to the republic's leadership. "I think that the privatization [of the Bashkir fuel and energy complex] will not take place," TNK Chairman of the Board Viktor Vekselberg told Vedomosti in June, "or it will be of a rather formal nature."

But, as the auditors of the Accounts Chamber found out, on April 12, BTK and Bashneftehim transferred controlling stakes in Bashneft, four plants and Bashnefteproduct to seven little-known LLCs, most of which are registered in the Republic of Bashkortostan: ATP-99, Sotsservis, Shchit Security Company, Taimas, Oil Refining Mechanization and Transport Enterprise, Neftekhimtrans Firm and Khimspetstrans. The founders of these companies are 19 individuals. And on June 24, according to the Accounts Chamber, the new owners of the Bashkir fuel and energy complex decided to contribute the enterprises they received to the authorized capital of the new holding company, Bashkir Capital LLC.

"This is the most unprecedented case of theft of assets from federal property in the history of oil refining companies in Russia," said Vladislav Ignatov, an auditor with the Accounts Chamber who conducted an audit in Bashkiria, yesterday. "We will raise this issue with the president and the government and ask the Prosecutor General's Office to take action against the Bashkir authorities, who have clearly exceeded their authority." Ignatov notes that even when assessing the shares of Bashkir enterprises at par, the budget's losses from their sale are estimated at $118 million. And Aton analyst Timerbulat Karimov estimates the value of Bashkir fuel and energy complex enterprises at more than $2 billion.

Yesterday, there was not a single official in the Bashkir government who could comment on the results of the Audit Chamber's audit. Upon hearing what was being discussed, employees of the local Ministry of Property and the Ministry of Economic Development hung up or relayed through secretaries that the officials responsible for this issue had gone on vacation. The Bashkir Prime Minister's assistant for media, Talgat Abdrakhmanov, advised a Vedomosti correspondent to contact the administration of the republic's president, and Murtaza Rakhimov's press secretary, Marat Yamalov, refused to comment on the results of the Audit Chamber's audit, citing the fact that he was not yet familiar with the document.

However, a Bashkir official, who asked not to be named in the press, told Vedomosti that "in the republic they definitely connect the audit by the Accounts Chamber with the escalation of the struggle for the seat of the president of the republic, whose elections are to take place before the end of this year." "The republican fuel and energy complex has existed for 10 years, but during this time no one was interested in this issue," he says. "And now the audits are coming one after another, we don't know who to expect next." And Dmitry Orlov, deputy general director of the Center for Political Technologies, believes that Bashkir privatization could not fail to interest law enforcement agencies. "It is unlikely that anyone had any doubts that Rakhimov created the privatization schemes in the republic that were advantageous to him," says Orlov. "The question of the legality of these schemes was bound to arise sooner or later."

Privatization in Bashkir style