On the Record

Sibneft President Eugene Shvidler comments on upcoming merger with YUKOS to create YukosSibneft, a new international energy super major.

From an interview with Sibneft president Eugene Shvidler published in BusinessWeek Online, May 21, 2003.

 -  So, should Exxon Mobil (XOM ) be running scared of YukosSibneft?

 -  Trembling, absolutely. I'm kidding! But the idea is that now, by size -- by physical size of output, reserves, and stuff like that -- we're a supermajor. There's no doubt about it.

 -  And does Russia now have a national-champion company?

 -  It is a national-champion company, the most expensive Russian company. When we spoke to Prime Minister Mikhail Kasyanov and President Putin himself, both expressed the idea that we have to promote this company as a national oil company, in the sense that TotalFinaElf is a national French oil company and BP (BP ) is a national English oil company.

If we compete for a contract outside of Russia and the others [in competition] are TotalFinaElf and Chevron (CVX ), when Jacques Chirac is calling the Kuwaiti government, I want to make sure Putin is calling as well. And he will be.

 -  Before the merger, there was a lot of speculation that a Western oil major like TotalFinaElf or Royal Dutch/Shell aimed to buy Sibneft. Was the problem that it takes a long time for the Western majors to get sufficiently comfortable to do a big Russian deal?

 -  It takes forever -- even though, with the French, we know each other closely.... The price range was the same for everybody -- around $15 billion -- and it was always on the table. [But] it took me only three meetings, one hour each, to talk to Misha [Mikhail Khodorkovsky]. We have known each other for years and years and years.

 -  Khodorkovsky often calls himself a big fan of a strategic political and economic partnership between the U.S. and Russia, with one goal being increased Russian oil exports to the U.S. And he's a booster of building a new pipeline to the northern port of Murmansk, as well as turning it into a deep-water port to allow very large tankers to ship Russian oil to the U.S. What's your attitude about all of this?

 -  For all of us, it's economics, economics, economics. If Russia builds a deep-water port, then you are on the water in a big ship, and a big ship can go anywhere. It doesn't matter if you ship to the U.S., to Canada, to Japan.... As for Murmansk, we [at Sibneft] are huge fans of the project. It's going to happen. It will take three years to build it.

 -  Let's focus on your coming role as chairman of YukosSibneft, with your specialty in financial management. Critics say Yukos tends to sit on too much idle cash.

 -  I would say that [Sibneft's] strategy -- or better to say our implementation, execution -- was a little sharper. But even though we paid the highest dividends of all time in Russia, we could have done more. That's my personal ideology, that the company has to return all the cash to the shareholders. If the company sees an opportunity to invest more, it has to borrow the money. If the opportunity doesn't support borrowing, then it's a bad opportunity.

 -  The YukosSibneft deal calls for Yukos to pay the Sibneft core shareholders group $3 billion in cash plus sufficient YukosSibneft shares to give the core group its 26% stake. But the plan for minority shareholders is still being formulated. Are the minority shareholders going to be treated fairly?

 -  Nobody expects us to do anything less than this.... But there will be unhappy people. These people are vultures in any case -- the majority of people who invest in Russia today. It's not mom and pop in Idaho. And whatever you give them, they say, "Why not more?"

 -  What role is Roman Abramovich going to play at YukosSibneft?

 -  Zero. Behind the scenes, he will be one of the largest shareholders. But now everybody has come to the understanding that it's time to start hiring professional management.