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. Last Updated: 07/27/2016

More Privatizations Put Under Scrutiny

The federal government was defrauded out of at least $113 million during oil sector privatizations in the republic of Bashkortostan in the 1990s, according to the Audit Chamber.

"[This] is the most outrageous case of stealing state-owned assets in the history of Russian oil refining companies," said Vladislav Ignatov, a senior official at the State Duma's budgetary watchdog, Interfax reported.

Ignatov said the losses were discovered during a yearlong probe of the activities of the republic's quasi-independent Privatization Ministry.

He said numerous privatizations in the republic were "in gross violation" of the Constitution, federal laws and presidential degrees.

A series of illegal transfers of shares in former state companies that now have combined annual revenues of more than $1.5 billion began in 1993, when stakes in various oil-sector enterprises were added to the charter capital of state-owned Bashkirskaya Petrochemical Co., or Bashneftekhim. These stakes were then transferred to the Bashkirskaya Fuel Co., which Bashneftekhim, together with state-run oil major Bashneft, set up in 1999.

In April this year, those same stakes were parceled out among seven enterprises affiliated with the Bashkirskaya Fuel Co., and then an attempt was made to consolidate them into a newly created, privately held offshore company called Bashkirsky Capital Ltd. The Audit Chamber, however, prevented that effort.

Ignatov said that because of the large tax arrears accrued by Bashkortostan's petrochemical industry in the 1990s, most of the companies involved were allowed to sell additional shares to repay their debts. But neither the $113 million that was promised during their privatizations nor the tax debts were ever paid, he said, adding that some tax arrears were reduced by using an offshore scheme involving the special status of the Baikonur Cosmodrome.

Ignatov said the results of the Audit Chamber's investigation have been sent to President Vladimir Putin, Prime Minister Mikhail Kasyanov, Volga Federal District presidential envoy Sergei Kiriyenko and the Prosecutor General's Office.

He also said the Bashkortostan government had failed to bring its privatization laws into line with the Constitution, and hinted that once it does some redistribution of property in the region might follow.

He did not elaborate.

The Audit Chamber report comes amid growing speculation that a faction in the Kremlin is intent on overturning at least some of the scandalous privatizations of the 1990s.

Billionaire Platon Lebedev, the chairman of Group Menatep, the parent company of leading oil company Yukos, was arrested on July 2 and charged with stealing a $283 million government stake in fertilizer monopoly Apatit in 1994. The arrest was the first salvo in a string of Yukos-related probes that many analysts believe is politically motivated.

The Moscow City Court rejected lawyers' requests to free Lebedev on Wednesday.