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. Last Updated: 07/27/2016

Russneft President Charged, Police Say

Mikhail Gutseriyev, the president of fast-growing oil company Russneft, has been charged with "illegal entrepreneurship" over exceeding production quotas, the Interior Ministry said Tuesday. But Gutseriyev insisted Tuesday that he had not been charged, only questioned.

The ministry's investigations committee said it had charged Gutseriyev on May 4, several months after prosecutors accused three Russneft subsidiaries of exceeding their production quotas. The charge carries a maximum punishment of five years in prison or a fine of 500,000 rubles ($19,000).

The charge was filed against directors of two Russneft subsidiaries, Ulyanovskneft and Nafta-Ulyanovsk, Gutseriyev said. He did not name the third production unit that was previously investigated, AganeftegazGeologiya.

In February, the ministry's investigations committee accused Gutseriyev of tax evasion, Vedomosti reported Tuesday. A spokeswoman for the committee, Irina Dudukina, denied the report.

Sources close to Gutseriyev said the legal onslaught on his oil company, the country's eighth-largest, began after he found himself at odds with the Kremlin in 2005, Vedomosti reported. Previously considered Kremlin-linked, Gutseriyev reportedly angered the Kremlin by buying Yukos assets and refusing to sell Russneft to a state-run company.

Against the backdrop of the state's legal onslaught against Yukos, Russneft in 2005 bought Yukos' 50 percent stake in Zapadno-Malobalykskoye, a Siberian joint venture with Hungarian oil firm MOL. In 2006, Gutseriyev attempted to buy Yukos' stake in Transpetrol, a Slovak oil pipeline company, but the Slovak government blocked the sale.

Kommersant said Tuesday that Gutseriyev, an ethnic Ingush, had annoyed the Kremlin by getting involved in politics in Ingushetia and advocating a free economic zone in Chechnya.

Speaking to reporters on the sidelines of a meeting at the Natural Resources Ministry on Tuesday, Gutseriyev dismissed the newspaper reports. "What the newspapers write is a monstrous lie that doesn't worry me at all because a newspaper becomes toilet paper after two hours," he said.

He was upbeat about the outcome of the investigation. "There's nothing scary in the prosecutor's office. What are you so afraid of?" he told reporters.

When the investigation started in November, the Prosecutor General's Office said three Russneft units had produced and sold extra oil worth 7.7 billion rubles ($290 million) from 2003 to 2005. The company denied any wrongdoing.

On Tuesday, Gutseriyev said investigators accused two of the three units of producing from 40,000 tons to 60,000 tons of oil above their quotas at a time when they were not yet part of Russneft.

The implications of the legal battle surrounding Russneft could be a topic during the upcoming State Duma and presidential elections, UBS said in a note to investors Tuesday. But Konstantin Batunin, an oil analyst at Alfa Bank, said the matter would most likely be resolved before a new administration took office. He said the government's drive to bankrupt Yukos lasted four years, but "the authorities don't have such a resource of time now."