Russian Tax Authorities Continue To Crusade Against Oil Firms

by Tatiana Smolenskaya, Tax-News.com, Moscow

31 January 2007

Senior managers from the fast-growing mid-sized oil company Russneft have been questioned by government tax investigators as the Russian government seemingly continues its drive to exert greater state control over the private energy sector.

According to a report by the Interfax news agency, the Interior Ministry has said that it is investigating allegations of "large-scale tax evasion" against Russneft. The report added that the company's offices have been searched and its president and founder, Mikhail Gutseriev, has been questioned.

In a statement, Russneft confirmed that "some documents, essential for the investigation, were seized from the Company’s office and some senior managers of the Company were interrogated as witnesses."

It is believed that the probe is connected to an earlier investigation by the authorities into suspicions that Russneft breached the terms of its operating licence by selling roubles 7.7 billion (US$290 million) more oil from its three production units than its licence permitted.

However, the charges have led to further speculation that the government continues to flex its muscles over the private oil sector in a bid to increase its control of the country's vast mineral wealth. The case of Yukos, once Russia's largest private oil concern, is often highlighted by critics of the Kremlin's energy policy as evidence of this. Faced with back tax bills stretching to almost US$30 billion, Yukos was last year declared bankrupt, and state-run companies are poised to snap up the company's remaining assets. Yukos's former chief executive, Mikhail Khodorkovsky has also been jailed for tax evasion, fraud and embezzlement.

Russneft's statement went on to stress that it would "render all assistance" to the investigation and expressed confidence that the Ministry of Internal Affairs will "scrupulously and objectively study the case that has arisen in connection with production activity of the Company’s subsidiaries."

Russneft was founded by Gutseriev in 2002 after he was ousted as head of state-owned oil company Slavneft. It has since become Russia's fastest growing private oil company, producing about 17 million tons of oil in 2006.

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