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. Last Updated: 07/27/2016

Slavneft, Vneshtorg Feud in Germany

A German court has demanded Slavneft pay $2.6 million in loans that it guaranteed to a German bank, but the oil major contends it doesn't have to pay because the guarantee's existence violates Russian law.

The conflict puts two state-controlled structures at odds with each other. Slavneft, Russia's eighth-largest oil company, is owned by the governments of Russia and Belarus. The controlling packet of Frankfurt-based Ost-West Handelsbank lies in the hands of Vneshtorgbank, which in turn is 99 percent controlled by the Central Bank.

"We believe that conflicts between two state-controlled companies should be resolved through negotiations," a Slavneft spokesman said.

The saga began in early 1998, when then-Slavneft president Anatoly Fomin signed a letter that guaranteed part of a $6 million loan to Uni-Baltic Oy, an obscure Finnish trading company.

In a release issued Wednesday, Slavneft conceded that Fomin signed such a letter but stated that the process was plagued by "crude violations" of the company charter. For example, Fomin did not seek board approval before signing off on the guarantee. Also, Slavneft was legally prohibited from taking on foreign-currency obligations without prior approval of Russia's Central Bank.

Ost-West Handelsbank approached Slavneft about the guarantee on June 10, 1998, and was refused. Its repeated attempts to receive the repayment were unsuccessful, so the bank decided to take Slavneft to court in Frankfurt.

Fomin was ousted as Slavneft's board chairman in July 1998 after Deputy Prime Minister Viktor Khristenko called the company's tax payments into question. In August of that year, the board voted him out as president while he was on vacation. Fomin spearheaded Slavneft's creation while he was deputy fuel and energy minister in 1994.

Fomin, now board chairman of Yugra Bank, could not be reached for comment.