Dan Ackman
Forbes.com
07.29.04

NEW YORK - There is a new world oil crisis, this one from Moscow, one time zone west and about 1500 miles north of Baghdad or Riyadh. While the current crisis may be fleeting, it does represent a third hot spot for world oil, following recent price scares from Venezuela, and those starting in Saudi Arabia and, of course, Iraq. What hasn't changed is that oil remains a political football being kicked around by plutocrats and autocrats.

This week's turmoil arises from a long-running legal dispute between the Russian government and Yukos Oil, Russia's largest oil company, and its imprisoned chief, Mikhail Khodorkovsky, its richest man, though his fortune, like his freedom, is now very much in doubt.

Yesterday, oil prices spiked to more than $43 a barrel on the New York Mercantile Exchange, which is a record if one disregards inflation, but is nowhere close to the real price for oil in the early 1980s. With the world's spare oil pumping capacity almost nonexistent, any threats to supply can have serious and instant price effects.

The current panic started on rumors that Yukos might be forced to stop exporting oil due to its intensifying conflict with the government. This morning, though, Russia's Justice Ministry tried to calm fears by saying it hasn't ordered a halt to production and sales of crude oil pumped by Yukos. It has, however, barred sales of physical assets that the government may claim in order to secure its claim to $3.4 billion it says Yukos owes in taxes and fines.

All this may make oil consumers pine for the days when a few white-robed men from the Middle East would meet somewhere like Singapore or Vienna and hash out the world's oil supply. Now non-OPEC countries like Russia and Mexico are far more important, as are nations like China and India, though on the demand side of the price equation. Global oil companies like Exxon Mobil (nyse: XOM - news - people ), BP (nyse: BP - news - people ), and ChevronTexaco (nyse: CVX - news - people ) were all up about 1% yesterday, though anticipation of ExxonMobil's and ChevronTexaco's earnings report scheduled for today and tomorrow may have played a larger factor.

Yesterday in Moscow, Yukos said it was seeking "clarification" of the government's order and Andrei Belyakov, the head of the bailiff department at Russia's Justice Ministry, told Bloomberg News, "We aren't cutting off oxygen to Yukos. These preventive measures do not affect oil production or sales. The order applies only to the sale of physical property.''

In response to such comments, the price of crude for September delivery fell below $43 in overnight electronic markets.

Yukos ships 1.6 millions of barrels of oil daily. To put that total in perspective, Kuwait's current OPEC quota, which it may be exceeding, is 2.1 million barrels a day. Still, last week Yukos officials said the government investigation and tax claim may lead it to bankruptcy.

The cases against Khodorkovsky involve charges that his Menatep group took 20% stake in fertilizer manufacturer Apatit without investing the $280 million it had promised. While the fertilizer company is small potatoes for Khodorkovsky, the conflict has spilled over to impact Yukos, a vastly larger concern that Khodorkovsky also controls as a result of the still controversial Russian privatization in the 1990s. Khodorkovsky has financed political parties to challenge Russian President Vladimir Putin and has advocated that the government oil pipelines be privatized, as other assets were a decade ago. His backers say his political position is the real reason for the legal charges against him.

These are the kinds of conflicts that have long been absent in "stable" oil-rich nations like Saudi Arabia, or, if they do occur, they are well behind the scenes. Of course, the Middle East has lately seen its own, much larger conflict, so perhaps at the end of the day it will be Russia that is considered the stable one.

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