MOSCOW (AFP) - Gas giant Gazprom's absorption of Russia's state-owned Rosneft his a snag amid Kremlin infighting over a looming redistribution of the country's lucrative energy sector.
The news came as Russian companies tensely jostle for position and seek the Kremlin's blessing to scoop up the remains of fallen giant Yukos -- once the country's largest oil producer which is now facing an insurmountable tax bill.
Analysts suggests that Russia is now heading toward the creation of a massive new energy super-giant but that the question remains which Kremlin clan and related businesses would be at its helm.
The latest trouble came into the open Monday when the Kommersant business daily published a letter from Rosneft chief Sergei Bogdanchikov to President Vladimir Putin demanding that his company retain rights to its name and have seats on the board of the new entity.
He also urged the state to retain a 20 to 25-percent stake in Rosneft rather than simply be swallowed up by Gazprom.
Rosneft's board is headed by Igor Sechin -- the deputy head of the Kremlin administration who is seen as a Kremlin hawk who has clashed with the liberal members of Putin's inner circle.
Gazprom's board meanwhile is headed by Sechin's direct boss Dmitry Medvedev. He is seen to have links to more liberal state officials and has proposed making Rosneft into a daughter company of Gazprom -- the world's largest natural gas producer.
Kommersant reported that Putin has instructed the head of the state property management agency to look into the dispute. The paper interpreted this to mean that the split was a serious matter that the president could not duck.
The framework agreement struck last month would have increased the state's stake in Gazprom from 38 to 51 percent and analysts said that Rosneft's protest would scuttle those plans.
"This implies that the development of a detailed Gazprom/Rosneft acquisition is now likely to be delayed," the United Financial Group said in a research note.
The letter has broader implications for Western investors who are keen to buy into Gazprom but are barred from doing so in large quantities by a so-called "ring fence" which Moscow said would be lifted should the state win back the majority stake in the gas behemoth.
Rosneft -- the last big oil company to be owned by the state -- ranks seventh in Russia and last year produced 19.4 million tonnes of crude oil.
Infighting over the merger comes against the backdrop of a re-alliance of the lucrative Russian oil market that has seen the fall of the country's largest producer Yukos under the pressure of an insurmountable tax bill.
Analysts speculate that the market will probably now be concentrated in the hands of a few powerful companies linked to the Kremlin whose names will emerge in the coming months.
"It has long been our view that (President Vladimir) Putin will want to create a state oil giant to rival the OPEC structures and to compete with the global oil majors before the end of his second term" in 2008," said Chris Weafer, chief strategist at Moscow's Alfa Bank.
Russia is already the world's second-largest oil producer after Saudi Arabia.
Most analysts have focused on Gazprom, Rosneft and another oil giant believed to be close to the state -- Surgutneftegaz -- as the likely winners in the coming industry shakeup.
The big prize everyone is after is the massive assets owned by Yukos which none is able to afford alone but could acquire should they unite into a new Russian super-conglomerate that would instantly become a global player.
Alfa Bank took the strategic view that Gazprom and Rosneft would eventually put aside their differences -- and then come to be headed by Rosneft's Sechin, a man with a secret service past who Putin put in charge of the company this year.
These two, according to Alfa's prognosis, would then unite with Surgut and go into a 50:50 joint venture with the state, forming the Russian energy superpower.
There was no official comment Monday to the Rosneft letter from either state or Gazprom officials.