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. Last Updated: 07/27/2016

Doors Opening Wider for Exxon

In the government's strongest endorsement yet of a possible sale of a stake in YukosSibneft to global oil giant ExxonMobil, Energy Minister Igor Yusufov said Friday that Russia would welcome such a deal as a "positive step."

"Of course, it fills us with pride that discussions are under way with the first company in the world, ExxonMobil," Yusufov said at a news conference for foreign reporters, AP reported.

"And to receive the addition of such a strong partner, we believe that would be a positive step."

His statements capped a week of growing murmurs of approval about an Exxon deal. First, President Vladimir Putin confirmed in an interview with The New York Times on Oct. 4 that talks on a sale were going on, but said that although the Russian government welcomed foreign investment, it expected to be consulted first.

Then, on Tuesday, an unnamed government source seemed to crack open the door for Exxon, telling Interfax there were no legal barriers for it to buy a large stake in YukosSibneft.

The door was opened wider Thursday when First Deputy Economic Development and Trade Minister Arkady Dvorkovich told a conference in New York that the government would have no objections to a foreign company taking control of Yukos.

"There are increasing signals from Russia that it would welcome a deal. It seems that this could be coming to a head," said Paul Collison, senior energy analyst at Brunswick UBS.

But with Yusufov apparently giving the nod of approval for Exxon to come in just one day after law enforcers stepped up the pressure on Yukos CEO Mikhail Khodorkovsky in new raids, many observers were left scratching their heads as to what the Kremlin's endgame is. In those raids, investigators seemed determined to leave their mark, emptying entire filing cabinets and even kicking through a wall to seize a computer in the company's business compound in the elite Moscow region village of Zhukovka. (See story below.)

Some analysts have speculated that Khodorkovsky has been pushing for a sale of a stake in his company to a foreign oil major as a way of gaining protection from further Kremlin attack. The Yukos founder has been under fire from prosecutors since July when they jailed core Yukos shareholder Platon Lebedev on fraud charges and also opened investigations into alleged tax evasion, murder and attempted murder by company officials. Observers have seen the onslaught as a response to Khodorkovsky's financing of opposition parties amid a battle for position ahead of elections between two opposing Kremlin clans.

But others say that under such tense circumstances, the only way the normally ultra-conservative ExxonMobil could go in would be for it to receive assurances that Khodorkovsky's role in YukosSibneft would be diminished after the sale -- a prospect that could dovetail with Kremlin wishes to rein him in.

"[The sale of a stake to a foreign oil major] could be a double-edged sword for Khodorkovsky," said Alexei Mukhin, the director of the Center for Political Information. "On the one hand, it could make him untouchable. But on the other, it could end up diminishing his clout. That's what the Kremlin could be eyeing."

In what appears to be growing activity surrounding a possible deal, Putin met with Exxon CEO Lee Raymond during his visit to the United States in late September. Then, Raymond returned the visit and came to Moscow last week where he met with Prime Minister Mikhail Kasyanov. Just over a week ago, the Financial Times, citing sources close to the negotiations, reported Exxon could buy a 40 percent stake in YukosSibneft for $25 billion. Neither of the companies, however, will comment on a possible deal.

Chevron is also rumored to be considering buying a stake as a race heats up between multinationals for a chunk of Russia's reserves.

"If Exxon did come in, it would be in line with what Putin did with other troublesome businessmen," Collison said. "It would allow him to keep his wealth but exit the scene to some extent.

Collison said it is likely Exxon would go for a 40 percent stake with an option to buy the rest later.

"Putin has clear-cut objectives for the Russian economy. An alternative scenario with neither Exxon nor Chevron coming in and having Khodorkovsky still embroiled in legal and political difficulties is a much less attractive scenario than having a multi-billion dollar foreign direct investment deal," he said.

"Having Exxon coming in would be a huge endorsement of Russia. It makes sense from many different perspectives," he said. "It would help Khodorkovsky exit to some extent and brings in a stable player."

He said comments made by a senior Exxon official at a Brunswick UBS conference in Moscow at the end of September appeared to signal Exxon was gearing up to move in. The official said Exxon would be happy to have less than 50 percent of YukosSibneft and was no longer concerned about problems with state-owned pipeline monopoly Transneft in western Siberia, where most of Yukos and Sibneft's existing fields are located, according to Collison. "Before now Exxon has always said they would stick only to the periphery in Sakhalin [where Exxon operates an oil and gas field]. This is a big change in policy."

But others said the situation appears to be far from cut and dried. "The reason why they're nervous about Khodorkovsky is that by bringing in a foreign company, it would make him immune [to attack] and he would still have a political agenda," said Stephen O'Sullivan, co-head of research at United Financial Group. "Even if they bought him out completely, he would have $20 billion in his pocket, enough to fund any political campaign. I'm not sure that's going to make him any less troublesome."

"It would be unusual if Exxon did not exercise some influence [over Khodorkovsky if it bought into YukosSibneft]. But Khodorkovsky may not want to give up control," he said.

Yusufov also appeared to make clear the government still wants to bargain with Exxon on what the conditions would be for a deal.

"They have to understand the conditions surrounding the goods they are buying," he said at the news conference Friday. "If we take some step tomorrow, Exxon could say, 'That's it, we're leaving the market.' So we have to inform our partner. That's probably what the president meant." Yusufov seemed to be referring to Putin's comments to The New York Times.