Constant's pations

If it's more than 30 minutes old, it's not news. It's a blog.

Thursday, December 23, 2004

Comparing Yukos to Enron -- Two democratic approaches to energy conglomerates

US State Department sounded rather foolish when it lambasted the Russians for their approach to Yukos. The US is just upset the Russians acted, unlike the US approach to Enron.

Yukos and Enron offer to interesting case studies on how societies deal with energy conglomerates. In both cases we have large energy conglomerates. However, how both societies approached this concentration of power is noteworthy.

Enron was permitted, under the "watchful" eye of the auditors and the Securities and Exchange commission, to spiral out of control. The US would rather take a hands off approach to energy companies if that company advances the agenda, or the company can persuade the "regulators" to do nothing.

Yukos, on the other hand, was dealt a swift blow. Rather than let it continue to remain a threat, the government acted.

If you were in investor in both cases you'd stand to lose alot of money. Sounds like the common element is energy. The issue is not whether Russia or the US is a relative advantage for corporate governance and reliable regulatory mechanism.

Which brings us back to the State Department's comment. What is the notion that the Yukos action is a signal that Russia remains questionable as a land for the "rule of law"?

The US track record is no better. Enron raises questions about the merits of this allegation. It was only after Enron imploded that the regulators awoke from their coma. Mind you, this was the third or fourth round of major financial disasters prompting the auditors to ignore the SEC Blue Ribbon Commission.

Apparently, the State Department and the Enron auditors are on the same page: Ignore reality, and then find something to justify that ignorance.

No surprise why State cannot find enough "volunteers" for Iraq duty. People are sheep, but they are not perpetually stupid. Then again, the smart ones no longer work at State.

Russia is taking action before the disaster. Whether the action is in the interests of the US is a separate matter. We shall not speculate as to which investment bankers are pushing on State to get a bailout. Think Argentina and pennies on the dollar.

Free markets remain free only as long as people pretend they are. At least the Russians are honest.

Buyer beware, even in the US.