16th May, 2005

There was no green on the screen in Russia’s equity trading Monday. The downturn gathered impetus on the strong likelihood that a harsh sentence will be handed down shortly in the Khodorkovsky, Lebedev and Krainov case. The former head of Yukos has already been found guilty of fraud and embezzlement and faces a maximum prison term of 10 years. The sentence will be read out within the next couple of days.

The market was also downbeat over growing concern that the Gazprom-Rosneft merger could be called off. Industry and Energy Minister Viktor Khristenko recently stated that the state does not necessarily need to merge Rosneft in order to gain a majority interest in the gas mammoth. An alternative could be for the state to pick up the needed shares by selling off a stake in Rosneft to a Chinese or Indian oil company. The point of such a deal would be to make sure that Gazprom’s hands are not tied by an onerous debt burden or Western litigation from having swallowed up Yuganskneftegaz.

Against this backdrop, most RTS blue chips traded down within a band ranging from -0.36% (Surgutneftegaz) to -0.62% (Lukoil). The RTS index pulled back 0.56% to 638.90 on thin volumes amounting to $9 mln.

MICEX blue chips sank even deeper into the red on Monday with most closing within a spread ranging from -1.7% (Sberbank) to -5.3% (Mosenergo). The MICEX index dipped 2.48% to 564.43 on trading volumes totaling $463.48 mln.

Meanwhile, investors turned on Gazprom (-3.2%) with a vengeance, with the gas monopoly sliding to Rub 73.96 and $18.2 mln changing hands.

Finam
Russian Brokerage Company
http://www.fin-rus.com