Gettys Sue Gazprom

The Getty family, led by Mark Getty, grandson of oil billionaire John Paul Getty, will launch lawsuits today against Gazprom, Russia's part state-owned gas monopoly, in the high court in London and the American Arbitration Association in New York.

"I would prefer not to be seeking legal redress in courts," said Mr Getty. "But how do foreign companies operate in circumstances in which there is not enough transparency or a clear enough road map giving international investors confidence that they can not only put money in but that they can get it out?"

When the Gettys decided to put money into Russian oil nearly four years ago, they did not expect to become embroiled in lawsuits involving the world's biggest natural gas producer in order to recover the investment. But what started out as a straightforward sale of its oil asset in Russia's Orenburg region, ultimately to the China National Petroleum Corporation, has led to a legal battle spanning three continents.

Last year, Magnum Oil, owner of Victory Oil, the company backed by the Gettys, decided to sell its 61.8 per cent holding in Stimul, the oil and gas joint venture with Orenburggazprom, a regional subsidiary of Gazprom, through an auction process that produced about 10 bidders, including Gazprom.

In late November, Victory and CNPC, which made an offer of Dollars 150m to Dollars 200m, concluded and signed the sale agreement in Beijing. But the deal fell through and questions have arisen over Gazprom's role.

Separately, Russia's anti-monopoly ministry delayed granting approval for the sale of Stimul to CNPC. Last month, Gazprom filed lawsuits against several parties including Victory and OGP, its own subsidiary.

Beyond the risks foreign investors face in becoming involved in the control of strategic assets, the saga reflects aggressive efforts by the new management appointed to Gazprom by President Vladimir Putin in 2001 to recover assets over which it lost control during the 1990s. Since 2001, Gazprom has regained control of a number of strategic assets and contracts.

The impending court battles also highlight the continued legal uncertainties over the acquisition of businesses in the post-Soviet period amid growing attempts by the state to rein in private and foreign companies in the natural resource sector in favour of state- controlled Russian groups.

Gazprom confirmed it had taken legal action to re-establish its control over Stimul, restoring its prior status as 51 per cent shareholder. Its stake had fallen to as low as 38 per cent following what it described as "manipulations" in the period to 2000. Gazprom is challenging the original allocation of the oil licence to Stimul away from its subsidiary and claiming it had pre-emption rights, a claim that Victory is likely to contest.

Gazprom denied objecting in principle to involvement by the Chinese, with whom it had good co-operation, in the Orenburg project but CNPC's failure to acquire Stimul would represent the latest humiliation for the Chinese in attempting to strengthen co-operation with Russia.