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Kansan in the Land of Kremlin Hardball

U.S. Oilman Finds Himself at Helm of Besieged Yukos Empire

By Peter Baker
Washington Post Foreign Service
Friday, July 30, 2004; Page A01

IGOLSKO - TALOVOE OIL FIELD, Russia -- He did the things a chief executive is supposed to do. He snipped the ribbon, handed out awards and launched a new facility to the strains of Russian folk music as women in traditional costume hovered nearby. This being Russia, he did his best to fend off the cognac and vodka at a celebratory buffet lunch.

But for all the trappings of another successful business day, the lunch here in this remote corner of Siberia seemed oddly quiet, almost funereal. As the chief executive of Yukos Oil Co. left for his helicopter, the regional governor approached him and shook his hand with empathy. "I wish you all the best," the governor said, "as you try to pull out of the nose dive."

Steven M. Theede says he believes Yukos Oil Co. can still be saved. (Mikhail Metzel -- AP)

Steven M. Theede has come to realize he's not in Kansas anymore. Somehow it has fallen to him, a native of the American heartland, to save Russia's biggest oil producer from the Kremlin. The Russian tycoon who hired him last year and gave him three months to come up with an action plan wound up in prison before the deadline expired. The company Theede took over has logged record profits and production yet may be forced into bankruptcy within a week or two. In the end, it may be severed into pieces and swallowed up by the state.

"I still feel there are some proactive things that can be done to save the company," he said this week as he toured the vulnerable Yukos empire. "I have to believe that. As soon as I stop believing that, we might as well give up."

Nothing he learned at Nickerson High School or Kansas State University could have equipped Theede for the byzantine world of Russian high politics and business. Certainly nothing like this ever happened during the 30 years he worked his way up the chain at the U.S. oil giant Conoco and its successor, ConocoPhillips. "There's a level of certainty and predictability in Western companies," he said. "Not all that's predictable here."

Each day seems to offer another object lesson in that observation. Yukos's chief shareholder, Mikhail Khodorkovsky, and a top partner are on trial in Moscow on financial charges. Another partner was accused this week of organizing contract murders. The state keeps recalculating old tax returns and hitting the company with new multibillion-dollar claims. Yukos's assets and bank accounts have been frozen, its loans declared in default. And the state plans to confiscate its prime production unit, with $30 billion in reserves, the core of the company's operations.

Theede experienced more of the roller-coaster ride this week as his chartered jet sped from Moscow for a whirlwind visit to the company's facilities in Tomsk. New state writs seemed to order the company to stop pumping crude altogether, throwing international markets into a frenzy and driving world oil prices to a record high.

By Thursday, the state had retreated, lifting those writs and indicating that it never meant to halt production, only to freeze asset sales by Yukos subsidiaries so that property could not be spirited out of the reach of tax collectors. Even so, the reprieve was temporary. Unless bank accounts are unfrozen, Theede said, production will have to begin a phased shutdown by the end of next week.

That an American would find himself in the middle of such a Russian saga only adds another twist to a battle that many politicians and business leaders see as a struggle for the direction of the country. What started out as a showdown between Russia's most powerful man, President Vladimir Putin, and its richest, Khodorkovsky, could help shape the future form of capitalism and democracy in a society still experimenting after seven decades of Soviet rule.

Theede, a fresh figure in a drama overpopulated with soiled characters, faces the challenge of trying to influence the story's outcome.

"Steve is a good oilman with a good reputation in the industry," Robert Dudley, the president of TNK-BP, the country's third-largest oil producer, and the only other American to head a major Russian oil company, said in an interview. "I doubt all of his training prepared him for what he's doing today."

Theede's presence arouses some resentment in a country leery of foreigners and deeply ambivalent about Americans. Yet some believe it helps Yukos to have an American in charge because it adds the credibility of an outsider to the company's case.

"Maybe it produces suspicions," said Alexei Kondaurov, a former top Yukos executive who now serves as a Communist member of parliament. "The issue, though, is not really Americans. It's different than that. If Theede had been appointed earlier, maybe the authorities would not have been that aggressive. If we had had investment by an American company, maybe it would not have been as aggressive."

Theede, 52, came to this moment after a career spent in the West. A college internship at Conoco led to a peripatetic three-decade trip through the company's various outposts, from Houston to Salt Lake City, Tulsa, Midland, Tex., and Cheyenne, Wyo. Eventually, he landed in Britain, where he was the company's president for Russia, Europe and the Caspian Sea.

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