Yukos Offers to Pay Part of Back Taxes

Russian oil giant Yukos has offered to pay one-third of the $3.4 billion the government says is due in back taxes and fines. The oil company said Wednesday the full amount could force it into bankruptcy.

The Moscow Arbitration Court upheld the tax claim against Russia's second-largest oil producer Monday. Yukos has warned that it doesn't have the cash to pay up front and could be driven to bankruptcy if a court order allowing it to sell its assets isn't lifted.


In a proposal drafted by the company, Yukos offered to pay $1.17 billion of the $3.4 billion total that it owes for 2000, spread out over a period of two years, as well as to cover the legal costs of the Tax Ministry's claim.


However, the company said it would not pay the remaining amount which comprises fines, VAT charges and penalties.


Stephen O'Sullivan, a research chief at United Financial Group, said that Yukos could claim that it was not liable for the additional penalties since the company was only told that it owed the money at the end of 2003.


However, if the tax authorities were to bill the company for taking advantage of onshore tax havens for the years 2001, 2002 and 2003, Yukos could face a total bill similar in size to the original $3.4 billion for those years combined, O'Sullivan said.


President Vladimir Putin said earlier this month that Russia "isn't interested in the bankruptcy of such a company as Yukos," raising hope that the Kremlin would be open to some sort of deal to save the business.


The tax case against Yukos was just one of many claims against the company and its former CEO, Mikhail Khodorkovsky.


Analysts see the web of court cases as a Kremlin-directed move to punish Khodorkovsky, Russia's richest man, for his funding of opposition parties and to ensure that such a key firm in Russia's strategically important oil sector is in the hands of someone more loyal.


Meanwhile, Yukos also said that it would delay the release of its 2003 financial results, due on Wednesday, as a result of the court's decision.


"We still need to know how the court decision will affect our accounts," Bruce Misamore, the company's chief financial officer told the Dow Jones Newswire. He declined to say when Yukos would release its results.

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