Luzhkov, Oligarch Have Talk Over Gas

After a late night telephone call between Moscow Mayor Yury Luzhkov and Roman Abramovich, full production resumed Wednesday at the Moscow refinery, averting a possible dry out at the city's gas pumps.

But the struggle for control of Moscow's largest supplier of gasoline is far from being resolved.

An announcement Tuesday that the refinery had halted operations sparked a wave of panic in local media, which warned that Moscow was on the brink of a gasoline deficit. A story on Kommersant's front page carried the headline: "Moscow Savors Its Last Gulp of Gas."

Luzhkov tried to put a stop to the furor Wednesday, saying he would not allow a gasoline crisis. "These expectations have been proven false, which is unfortunate for those who spread the rumors," Luzhkov was quoted by Interfax as saying.

Recent events at the Moscow refinery have made unexpected bedfellows of Luzhkov and Chukotka Governor and oil magnate Abramovich, whose Sibneft oil company elected four members to the refinery's board last week.

The refinery was forced to partly shut down Tuesday after state pipeline monopoly Transneft fulfilled a court order ordering it to stop transporting crude oil shipped by trader Nafta Petrol. The lawsuit was filed in an Omsk court by one of the refinery's minority shareholders. Sibneft denied it was behind the suit, although Luzhkov alluded to Abramovich's involvement.

Luzhkov said Transneft lifted its ban on Nafta Petrol after he spoke with Abramovich by telephone Tuesday night.

"I told him that even if some problems have cropped up between the refinery's shareholders, they shouldn't reflect on the city," Luzhkov said. "He understood me very well."

About half of the refinery's 870,000 tons of crude to be processed in August is to be supplied by Nafta Petrol. It is unclear who owns or controls the oil trader.

Sibneft, which holds 38.5 percent of the Moscow refinery, said it was not satisfied with what it considered to be a temporary solution to a management problem.

"All we want is value from our shareholding," said Sibneft spokesman Nick Halliwell. "We are not happy with the way the refinery is being managed at present."

After acquiring the stake from LUKoil last year, Sibneft said it wanted to bring the amount of crude it supplied to the refinery into line with its holding. It also requested that the refinery shift from short- to long-term supply contracts. The refinery's management said existing contracts make such an arrangement impossible.

The Moscow refinery issued a statement Wednesday saying processing was back at normal levels.

Sibneft's difficulties with refinery management arise from the its desire to run the refinery on its own terms, Luzhkov said.

"They didn't and won't get what they wanted," he said. "We are ready to work with Sibneft as a partner but not as the owner of Moscow's oil markets."

Sibneft does not seem to be paying heed to the mayor's words. The oil firm has called for an extraordinary shareholders meeting Sept. 26, a source close to the refinery said. A new board election is on the agenda.

Analysts said gaining control of the refinery -- which supplies 40 percent to 60 percent of the gasoline consumed in the capital -- would be a lucrative step for Sibneft. The oil firm needs to find outlets for its increasing production volumes.

Luzhkov does not want to see Sibneft directing too much of its oil to Moscow, said Yevgeny Arkusha, first vice president of the Moscow Fuel Association. Unlike the majority of Russia's regions, Moscow is not dominated by one or two large suppliers, and the mayor would like to keep it that way. The city government, which owns a controlling stake in the refinery, has a vested interest in keeping the Moscow market competitive and, thus, prices low.

"Any halting of the refinery is a threat to the city's economic well-being," Arkusha told Ekho Moskvy radio. "The city government is very attentive to all the nuances of this market."

Gasoline prices have shot up 20 percent since the beginning of the year, when crude prices on the domestic market were at all-time lows due to Russia's curb on exports. The jump in prices has alarmed Russian drivers and lawmakers in the State Duma.