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. Last Updated: 07/27/2016

Getty and Gazprom Face Off Over Stake

bloombergMark Getty
Natural gas giant Gazprom and American billionaire Mark Getty, co-founder of Getty Images, are embroiled in a legal dispute over a stake in a joint venture in the Urals city of Orenburg.

Getty told the Financial Times on Sunday that he would sue Gazprom in U.S. and British courts. Gazprom said Monday that it too was seeking legal action against Getty. A company spokesman refused to elaborate.

The conflict has its origins in the Stimul joint venture, which was set up in 1993 to boost production levels at a Gazprom subsidiary. Orenburggazprom held 51 percent while a little-known U.S. company, Avalon International, held the rest.

In an additional share emission in 2000, the joint venture changed its structure. Victory Oil, a subsidiary of Getty Trust, took over 25.1 percent of Stimul, and Gazprom lost its controlling stake.

By 2001 Victory Oil controlled 61.8 percent of Stimul, while Gazprom was left with a little more than 38 percent. When Victory Oil's stake was auctioned off last year, Gazprom lost the bid to China National Petroleum Corp.

The sum offered by CNPC has not been disclosed, but a source familiar with the deal said it was somewhere between $150 million to $200 million.

The gas giant has already succeeded in having the CNPC deal suspended.

Gazprom maintains that Stimul is crucial for its operations, as it is a major supplier to Orenburggazprom and Salavatnefteorgsintez, another Gazprom subsidiary.

"We aim to recover the initial structure in which Orenburggazprom controlled 51 percent of Stimul," the spokesman said. "We consider all the deals that were conducted afterwards as lacking legal basis."

He said a number of legal suits have already been filed in various Russian courts.

The spokesman, who did want to be named, said that Gazprom does not blame CNPC for the situation.

Gazprom said in a statement Monday that it is continuing a "dialogue with CNPC, which at the end of 2003 showed interest in joining the project."

Gazprom officials refrained from comment on the decision to issue additional shares, saying the move was made under Gazprom's previous management, which was replaced by President Vladimir Putin in 2001.

The new management team under Putin appointee Alexei Miller has made a considerable effort to recover various company assets that drifted away from the gas giant in the 1990s.

A source close to the case said that Gazprom will try to use the courts to reverse the procedure under which an operating license was issued to Stimul in the mid-1990s.

The source said Gazprom is also claiming it had pre-emption rights in the tender that led to the CNPC deal.

It was not possible to reach Getty on Monday.

But according to the Financial Times, he is also contemplating legal action to fight the former Anti-Monopoly Ministry's decision to freeze the CNPC deal.