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Radio Free Europe : CIS: Region’s IPOs Attracting Interest Despite Sakhalin Dispute

Mikhail Khodorkovsky, formally CEO of Yukos

(Former Tukos CEO, Mikhail Khodorkovsky, in the frame.)

LONDON, October 4, 2006 (RFE/RL) — Companies from all over the world head to the London Stock Exchange when they need to attract international investment and raise development capital.

Firms from Russia and elsewhere in the CIS are among the latest to head to London to launch initial public offerings (IPOs) — their first sale of stock to the public.

Interest In Russia, Kazakhstan

Earlier this summer, Russia’s Rosneft oil company earned upward of $10 billion in its London IPO, launched on July 19.

On September 28, a subsidiary of the Kazakh gas giant KazMunaiGaz, brought in a healthy $2.3 billion in a similar offering.

That result has some market experts speculating that foreign investors are increasingly looking for rich rewards in lesser-known corners of the former Soviet Union — and bypassing Russia, which has proven a capricious investment partner.

For Kazakhstan and other former republics, the future seems looking bright.

“I would imagine that their opportunities — regardless of the Russian situation — are very good,” says Matthew Maxwell-Scott, a specialist on CIS markets at the Confederation of British Industries, a forum for business-watchers and entrepreneurs.

Sakhalin And Yukos

He says confidence in Russian companies is taking a beating following Moscow’s move to renegotiate its production-sharing agreements with Royal Dutch Shell and other foreign firms involved in massive oil and liquefied-natural-gas projects in the remote Sakhalin region.

The Rosneft IPO, he says, was somewhat hampered by doubts over the legality of the company’s appropriation of a subsidiary of Yukos, the former oil giant systematically dismantled by the Kremlin following the arrest of its CEO, Mikhail Khodorkovsky.

Khodorkovsky supporters rallying in Moscow in June (TASS)Khodorkovsky was jailed on tax-evasion charges Yukos said were politically motivated.

Russia’s reputation is still recovering from the Yukos affair, Maxwell-Scott says. And yet, the current controversy over Sakhalin shows the Kremlin still hasn’t taken the lesson to heart.

“It doesn’t do an enormous amount for investor confidence. I think we don’t want to see the Russian government strong-arming foreign investors with the sort of behavior we’ve seen,” Maxwell-Scott says.

Shopping Around The Region

Other experts agree such scenarios may send investors searching for opportunities elsewhere in the CIS.

Charles Movit is a specialist on Russia and the CIS at the Global Insight market consultancy in Washington, D.C. He says the Sakhalin debacle may mean a setback for Russia — and could lead to a rise in investment for its neighbors.

“It certainly decreases investor confidence in Russia,” Movit says. “And if your interest is in that part of the world, then I guess it would increase interest in other areas, in other countries of the region.”

Several IPOs from the region are expected to generate considerable interest this fall.

Russia’s No. 1 and No. 2 aluminum companies, RusAl and Sual, are expected to issue an IPO in the coming months after they complete a merger.

Kazakhstan’s Kazkommertsbank commercial bank and the natural-resources group ENRC Kazakhstan will also be holding IPOs.

As for other resource-rich CIS countries, Movit says there are many sites of interest to potential investors. The question, he says, is how accessible they are, and how transparent the dealings will be.

“It also depends on where the resources are located,” Movit said. “Turkmenistan has got a lot of gas, but it can only get it out through Russia’s pipelines. You’ve got to have a market for what you’re producing as well and the way to get it there cost-effectively. So all that matters, as well as government policies.” and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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