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. Last Updated: 07/27/2016

Rosneft Faces Suit by Minority Owners

A group of Rosneft minority shareholders claims the state-owned oil company violated their rights and is filing for damages in a Moscow court.

The plaintiffs are members of an association representing shareholders in Rosneft's subsidiaries, namely the four main production units: Purneftegaz, Sakhalinmorneftegaz, Krasnodar-neftegaz and Stavropolneftegaz.

Rosneft has robbed Stavropolneftegaz of value through destructive transfer-pricing and acquiring the subsidiaries' equipment at below-market prices, said Oksana Yakovleva, spokeswoman for the association.

"I am getting phone calls from tens of minority shareholders every day who want to join us in our fight," she said.

Yakovleva declined to name which shareholders would be named as plaintiffs or the amount of damages sought. The suit is to be filed with the Moscow Arbitration Court by the end of this week.

Rosneft spokesman Alexander Stepanyenko said the company finds the claims "humorous."

"You've got to find this funny," he said. "We are in no way violating anyone's rights."

Initial financing for the association came from Gregory Trading and Richard Enterprises, two Swiss-based companies whose combined share in Stavropolneftegaz is 26 percent.

Both companies are affiliated with Sibneft, but no cross-ownership exists. Officials from Millhouse Capital -- the company that manages the assets of oligarch Roman Abramovich, including Sibneft -- say the two companies have no relationship with Millhouse.

Gregory Trading and Richard Enterprises have been joined by Livart Investments, a shareholder in Purneftegaz.

The two Swiss-based companies acquired their stake last summer. Earlier this month, their representatives offered Rosneft the combined stake for $45 million, Stepanyenko said. Finding this too high, Rosneft refused the offer. The association was created immediately after the refusal.

When part of Rosneft was privatized in the early 1990s, it retained a 38 percent stake in all its subsidiaries. The state oil giant, however, votes with 50.6 percent of the shares.

Yakovleva said Rosneft used this voting power to illegally push through deals in which the oil company had a vested interest. She declined to elaborate, saying concrete details will be revealed once the suit is filed.

Rosneft has long been unpopular with minority shareholders. In 2001, it bought Purneftegaz assets for 10 billion rubles ($320 million), basically turning the company into an operator, Vedomosti reported. The subsidiary has also been the subject of a possible 8 billion ruble share emission that would dilute minority shareholders' stakes.

The Aton brokerage and Russkiye Investory investment bank said they would consider supporting the association's actions.