This content is from: Home

Lenders beware: Yukos strikes back

The Russian state companies bent on taking over the assets of oil giant Yukos may have the Kremlin on their side, but they still have to deal with Tim Osborne.

The Russian state companies bent on taking over the assets of oil giant Yukos may have the Kremlin on their side, but they still have to deal with Tim Osborne. So might any Western banks that try to lend the Russian acquirers money.

Osborne, a 53-year-old London tax lawyer, was thrust to the center of Russia's hottest controversy in March 2004 when he was named a managing director of Group Menatep. Until Yukos was dismembered by the Russian government over alleged unpaid taxes, Menatep owned most of it. Osborne, who had previously represented Moscow investors before the U.K.'s Inland Revenue, suddenly was asked to defend the interests of the group's imprisoned principals, Mikhail Khodorkovsky and Platon Lebedev. He has done so aggressively, promising a "lifetime of litigation" across the globe to anyone who dares touch what he defines as Yukos's stolen property.

Menatep and Yukos roiled Russia's December 19 auction of Yukos's production subsidiary Yuganskneftegas, persuading a U.S. federal court three days beforehand to consider a Yukos petition for Chapter 11 bankruptcy. That scared off the six Western banks that had planned to lend state gas monopoly Gazprom up to E10 billion ($13.6 billion) for the purchase.

Instead, a previously unknown company called Baikal Finance stepped in to buy Yugansk for $9.4 billion and was in turn acquired days later by state oil company Rosneft. Gazprom and Rosneft are scheduled to merge this year, although the Yugansk acquisition could now complicate that transaction.

Regardless of how the merger plays out, Osborne says Menatep is preparing lawsuits in the U.S. and half a dozen European countries aimed at attaching the local assets of Yugansk's new owners as well as those of the Russian government and any Western lenders or partners. Khodorkovsky, whose personal fortune in better days was estimated at $15 billion, has enough funds left to pay for the legal crusade, Osborne maintains. "These sorts of actions cost a fortune," he tells Institutional Investor, "but believe me, we are well geared up for them."

Osborne's recruitment by Menatep was not without its own air of intrigue. His predecessor, longtime Khodorkovsky legal adviser Stephen Curtis, died in a helicopter crash in southern England amid British press reports that he was receiving death threats and had volunteered information to U.K. intelligence. Osborne is one of the triumvirate that replaced Curtis, thanks to his friendship with the other two members: Nicholas Keeling, a Gibraltar-based attorney, and Kevin Bromley, who runs an Isle of Man trust company. "I guess I do the talking because I'm in London and accessible," Osborne says. To communicate with Khodorkovsky, who for 15 months has been locked up awaiting trial in Moscow, he relies on an anonymous trustee in Gibraltar, where Menatep is registered.

Osborne shrugs off the idea that he might be in danger, insisting that Curtis's death, which occurred on his way home to his castle in Dorset, really was an accident. He reflects, "I've got the best legal job going" -- all the more so as Menatep pays him by the hour. With Russia bent on repossessing Yukos, a company whose market cap was once more than $30 billion, there should be many more hours left to bill.