Khodorkovsky Seeking Deal on YUKOS

Russian tycoon Mikhail Khodorkovsky is ready to give up control of oil giant YUKOS to save it from bankruptcy, which could be just hours away, his lawyer said on Wednesday.

It is unclear whether the government is prepared to show mercy in its battle with the oil giant, which has until midnight on Wednesday to pay a $3.4 billion bill for tax arrears.


On Tuesday, a top finance ministry official said YUKOS might be given more time to pay the bill which the firm insists it cannot honor while its assets are frozen.


Then Prosecutor-General Vladimir Ustinov threatened to hit the firm with more back-tax charges on top of the total of $7 billion it already owes.


"(Khodorkovsky) has repeatedly said he was ready for talks," his lawyer Anton Drel told Reuters. "He has repeatedly said he is ready for financial losses ... including those related to shares."


The affair is widely seen as driven by President Vladimir Putin (news - web sites), determined to end Khodorkovsky's political ambitions and, in the process, send a clear message to the rest of Russia's billionaire businessmen not to work against the Kremlin.


The Financial Times quoted sources close to the discussions as saying that Khodorkovsky, in letters to the government, had offered to give up his 44 percent stake in YUKOS in a last minute deal to save his firm, one of Russia's most profitable.


Lawyer Drel denied Khodorkovsky had written any letter because he is banned from doing so in jail where he has been since October and is now on trial for tax evasion and fraud.


The trial resumes next Monday and some analysts have questioned whether the suddenly tighter squeeze on YUKOS is part of government tactics in a game of brinkmanship with the 41-year-old billionaire.


If found guilty, he faces up to 10 years in a labor camp.


CAT AND MOUSE


The report of a possible deal helped send YUKOS shares higher in early trading. At 4:05 a.m. EDT it was quoted up 11.5 percent at 223.50 roubles on Moscow's MICEX exchange.


YUKOS, which employs more than 100,000 people, continues to pump nearly a fifth of Russia's oil but its shares have lost more than half their value since April as authorities landed successive legal blows against the firm.


Analysts view the YUKOS saga as a game of cat-and-mouse between the Kremlin and Khodorkovsky, but many have said the protracted legal battle threatens to damage Russia's image among investors.


The State Department said foreign investors had been spooked by the government's treatment of YUKOS.


"The appearance of lack of due process and possible threat to private property rights have put domestic and international business communities somewhat on their guard," State Department spokesman Richard Boucher told reporters.


A senior U.S. official said: "We have seen fall-off in investment statistics, a turnaround from inward investment to outward flows of capital, so the Russians can no longer say this is not having an effect on the business climate."

Court orders have frozen YUKOS's assets and bank accounts, threatening to paralyze its operations and leaving it unable to raise cash needed to pay tax claims totaling almost $7 billion.

Nor can it unlock its stake of about $4.5 billion in its rival Sibneft, which it tried to take over last year.

Putin has pledged not to destroy YUKOS, and the expiry of the deadline for paying its tax bill would not automatically spell the end for the company.

Prosecutors could take a lenient line, or bailiffs could give YUKOS up to two months to raise the money.


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