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. Last Updated: 07/27/2016

Oil Companies Fear Zyuganov Win

Russia's top oil companies said Thursday that they would face the fight of their lives if a Communist wins the June presidential election, but industry analysts saw less cause for gloom and doom.


Russia's new black gold giants speak in apocalyptic terms about the havoc a red presidency could wreak on the world's third largest oil producer, an industry that has become one of the country's biggest success stories.


"The Communists first and foremost want control over Russia's energy sector because they see that it is the most developed and promising," said Pyotr Neyev, spokesman for LUKoil, Russia's biggest oil company in terms of reserves. "The risks that a Communist presidency would pose to our company are very great indeed."


Newly privatized oil companies say they are consulting with the camp of Communist Party leader and presidential hopeful Gennady Zyuganov to get a feel for his plans and to reach deals.


Zyuganov's party platform for the June 16 election supports partial renationalization of key industries like oil.


He is leading in most opinion polls, but incumbent Boris Yeltsin has narrowed the gap in recent weeks and is just ahead in this week's Moscow Times/CNN poll.


LUKoil president Vagit Alekperov said earlier this month that a Zyuganov victory would be devastating to the industry and that he was hitting the campaign trail on behalf of Yeltsin in the Tyumen oil region.


"Of course we don't want the Communists to win. Of course we have great reservations," said Andrei Krasnov, a spokesman for the second biggest company Yukos.


While analysts do not completely discard the dangers, they still say a red Russia might not be that bad.


"Unlike some other sectors, the oil people were in power when the Communists were," said Steven Sandweiss, senior energy manager at consultants Arthur Andersen in Moscow. "So I guess I'm somewhat surprised they're this scared."


Russia's oil majors say they have made great progress this year by working to improve refining and retail margins, courting joint ventures and restructuring.


But most are still have mountains of debt, back taxes and low reinvestment rates, which, they say, would be tough to finance if a Zyuganov presidency scares off domestic and foreign lenders.


"The Communists could not touch LUKoil or Surgut," said a Western equity analyst in Moscow. "But they could put the others into receivership."


Russian oil majors also fear they could go the way of Gazprom, the privatized natural gas company which, unlike the oil sector, has remained a monopoly while earning large profits.


"There's a tremendous push [by Communists] to turn the oil sector into a Gazprom-like structure," said a senior Western oil executive in Moscow. "The Communists say that if Gazprom can make money as a state monopoly, why can't the oil sector?"


Other officials have made noises about nationalization.


Deputy Prime Minister Alexander Kazakov, who also heads the State Property Committee, called for partial renationalization of LUKoil and Gazprom when he replaced reformist Anatoly Chubais as privatization chief in January.


Earlier this month, Kazakov said he wanted to preserve the state's influence in the oil industry and redeem state shares in oil firms sold in shares for loans auctions.








"We don't think there will be a turning back. But there will be some deviations," said spokesman Konstantin Ilyin of Sidanko, another big oil conglomerate.