A consortium of western creditor banks of the failing Russian oil company, Yukos, have sold letters of credit (L/Cs) worth US$482 million to another Russian hydrocarbon giant, Rosneft.

The debt transfer was seen as a prelude to the complete demise of the former oil giant, and the move may also turn out to be a significant play by Rosneft to seize what is left of Yukos' assets.

Advantage Rosneft

After it sold the L/Cs to Rosneft, the consortium of banks led by Societe Generale of France, asked to be replaced by Rosneft in the Moscow arbitration court that is dealing with Yukos. The arbitrators also declared Yukos bankrupt.

Rosneft is believed to be interested in Yukos' frozen assets. They are worth around US$11.3 billion, which more than compensates for the total L/C debt. By assuming the consortium's L/C debt, however, Rosneft has put itself in a strong position to bargain with the arbitrators for prime Yukos assets.

Suspicions

Representatives of Yukos had asked proceedings at the Moscow arbitration court to be suspended for a fortnight while they studied the documents related to the debt transfer.

Yukos has been slowly picked apart by judicial investigations some believe are inspired by the Kremlin. Its founder and formerly Russia's wealthiest man, Mikhail Khodorkovsky, was sentenced last year to eight years in jail for fraud and tax evasion.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.