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Russia's Rosneft Reports Net Profits Fell 15% in 2006

Russia's biggest oil producer OAO Rosneft said Tuesday that its net profits fell by 15% in 2006, due to one-time gains the year before and higher taxes.

State-controlled Rosneft said it earned $3.53 billion (2.61 billion euros) in 2006 compared to $4.16 billion in 2005, when its results were given a boost by the sale of its Sevmorneftegaz unit. The results beat the average of $3.20 billion (2.36 billion euros) that analysts polled by Dow Jones Newswires had predicted.

Rosneft has been the main beneficiary of the politically charged bankruptcy of OAO Yukos, gathering up all of the company's production and refining assets as it was liquidated this spring. The company now controls capacity of 2.1 million barrels per day, more than former leader OAO Lukoil.

"Despite industry-leading production growth and successful cost control, in 2006 our earnings and cash flow growth slowed due to a shortage of downstream capacity compounded by substantially higher taxes and strong real ruble appreciation," Rosneft President Sergei Bogdanchikov said in a statement.

"We have since vastly improved our downstream capabilities ... we are now focused on integrating these assets with recently acquired production assets," he said, referring to the Yukos' liquidation sales.

Yukos was pounded by $30 billion in back taxes in a campaign dating from 2003 that also saw its former owner Mikhail Khodorkovsky jailed. Observers called the case punishment for Khodorkovsky's political ambitions and a state drive for dominance in the oil sector.

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