28 | 04 | 2009

Market Update

Chief Executive Officer

Sibir  is  pleased  to  announce  that  Mr Stuard  Detmer has  been  confirmed as the Chief Executive Officer of Sibir.  His experience in a senior management role  within  the  Company  since 2003 will ensure effective management continuity for the Company.

Investigation into Related Party Transactions ("Investigation")

On 25 February  2009  Sibir  announced  that  it  had  appointed  the  solicitors, Jones Day, and the accountants, Ernst & Young,  to  carry  out  an  investigation  into  various  actual  and proposed transactions with Mr Tchigirinski and interests controlled by him in 2008.  The  Company  has  received an interim report in relation to the investigation, a copy of which has  been  delivered  to  the  Financial  Services  Authority  and  to  AIM.  Although  the  investigation by the Company is ongoing, the principal conclusions of the interim report are set out in the Appendix to this announcement and the Company reconfirms the sum of approximately $400 million as the total amount of money currently estimated to have been diverted from the Company.

Litigation against Mr Tchigirinski

As  previously  announced,  the  Sibir  Group  commenced  proceedings  in the  High Court against Mr Tchigirinski.  The proceedings  are continuing  and Sibir  is in without prejudice negotiations with Mr Tchigirinski to settle the claim on terms which the Board of Sibir (the “Board”) believes, having taken appropriate legal advice, would be a satisfactory settlement to Sibir given all the relevant circumstances.  The terms of the  proposed  settlement  are  confidential at present and if the negotiations  are  successful  an  announcement  of  the  terms will be made on  execution of the relevant documents.  The Board expects that if the settlement was successfully implemented the Company would receive return of a substantial amount of its total claims.

Further Investigations

Arising out of the Investigation and the routine annual audit the Company has conducted a detailed review of the carrying value of assets on its Balance Sheet as at 31 December 2008.  It has identified two major items that will  need to be fully provided in the audited accounts for 2008, namely, a bank deposit of $37,303,781 (which  the  bank  is  unable to repay due to  its  own  financial  position)  and  promissory  notes  issued  by certain regional  airlines  totalling  $34,810,596 as consideration  for jet  aircraft fuel sales (which  it  is unlikely  to  recover).  Although  the Company has received assets in exchange for  the  former,  the  Company does  not  propose to attribute any value to these assets for the purposes of the 2008 accounts, given their uncertain value.

Financial Consequences

Although  the  Company  expects  significant  recoveries  from  the  Tchigirinski  interests  in  due course, the Company’s intention  is to  provide fully in its 2008 accounts for the $400  million and the items mentioned above.  It will take monies recovered into income when received.

If  those provisions  were to be  made  the Company  would  expect  to make a loss after exceptional items for the 2008 financial year of up to $100 million.  The  precise amount of this loss could change as the Company continues its detailed review of its affairs.

Banking Facilities

The Company has  taken  steps to keep all  of its banking and trading partners fully apprised of its  financial and operating condition.  Constructive  discussions  with  the  Company's  principal  bankers   are  on-going   and they currently  remain supportive of the Company.

Review of Financial Controls

In view of the unauthorised payments made to Mr Tchigirinski and his companies, Sibir  has engaged a major accounting consultancy  firm to conduct  a complete  review  of  its  procedures, policies and practices regarding all internal controls, corporate governance and limits of authority.  It is the intention of the Board to implement the findings of this review in due course but it has in the interim taken steps to ensure no further misappropriation of funds.

Future Developments

In light of the recent acquisition by Gazpromneft of approximately 17 per cent of the Company’s shares, the Board intends to seek discussions shortly with its major shareholders about their intentions with regard to the Company’s minority shareholders and the strategic future of the Company.

Further announcements will be made as appropriate including as a result of the ongoing investigation by the Company and the progress of the negotiations with Mr Tchigirinski regarding a possible settlement of the Company's claims against him. In the meantime, the Company’s shares will remain suspended.

Appendix

1.         Between 16 September and 3 October 2008 Mr Henry Cameron arranged for Sibir and its subsidiaries (the “Sibir Group”) to pay $115.454 million to a company owned by Mr Tchigirinski in order to provide funds to Mr Tchigirinski to meet his liabilities. These payments were then subsequently characterised by Mr Cameron and Mr Tchigirinski as part payments to acquire properties from companies associated with Mr Tchigirinski known as the Sovietsky Hotel and New Sovietskaya.  Those acquisitions have not taken place and are now not ever intended by the Sibir Group to take place.

2.         On 16 October 2008 Mr Cameron arranged for another payment of $39 million to be made by the Sibir Group to a company owned by Mr Tchigirinski for the same purpose. No characterisation of that payment was made by Mr Cameron and Mr Tchigirinski.

3.         Between 19 October and 4 December 2008 Mr Cameron arranged for a further $174 million to be paid to a company which subsequently used those funds in repaying debts owed by Mr Tchigirinski to third parties or otherwise for the benefit of Mr Tchigirinski. Those funds were characterised by Mr Cameron and Mr Tchigirinski as payments for the purchase of oil products by the Sibir Group but no products were ever delivered or intended to be delivered to the Sibir Group.

4.         In December 2008 Mr Cameron arranged for the Sibir Group in effect to repay loans totalling $62 million made to companies owned by Mr Tchigirinski or connected with him.  The loans in question had been made by a company unconnected with either the Sibir Group or Mr Tchigirinski.

5.         In 2007 Sibir advanced $10 million to a company owned by Mr Tchigirinski in connection with the purchase of a private jet for Mr Tchigirinski.  The jet was purchased but the $10 million advanced by Sibir has never been repaid.

6.         Therefore, the total amount paid to companies owned by or connected with Chalva Tchigirinski in respect of which no value has been received by the Sibir Group is approximately $400 million.

7.         The acquisition by Sibir in September 2008 of the two properties located in the Sochi area where the 2012 Winter Olympic games are to be held and known as Krasnaya Polyana Olympic Centre and Katerina City for a total of ˆ22 million were in fact made from companies connected with Mr Tchigirinski rather than from unconnected parties as reported by Sibir in its circular dated 2 December 2008. Those acquisitions have been completed and the purchase consideration has been fully paid. However, it has been discovered that Sibir only acquired 74% of the Katerina City property. 

8.         It appears that further steps are still required to complete the acquisition by Sibir of the Korimos and Avtocard businesses and that the acquisitions may require further ratification at a future general meeting of Sibir's shareholders.