Russia magnate's trial resumes

The fraud trial of Russian oil magnate Mikhail Khodorkovsky has resumed as YUKOS, the oil giant of which he is the main owner, came up with a new offer to stop the state seizing its assets for unpaid taxes.

Khodorkovsky, one of the world's richest man, and his co-defendant Platon Lebedev spent eight hours inside a metal cage in a Moscow district courtroom, in accordance with Russian practice, as three judges considered lawyers' appeals.

The judges rejected a plea by Lebedev, 44, to be released from jail during the trial on the grounds of ill health before closing the hearing, to be resumed on Tuesday.

Before the trial restarted on Monday, YUKOS's new chief executive, Stephen Theede, was reported in Russian media to have offered the government $7.5 billion (four billion pounds) over three years to cover the tax arrears. The government was said to be cool to the idea.

"We in the government don't see much sense (in this proposal)," Vedomosti newspaper quoted a government source as saying, echoing earlier comments by Finance Minister Alexei Kudrin that YUKOS had enough cash and assets to meet its bills.

Interfax news agency later quoted a government source, however, as saying that officials were still examining Theede's proposals. The source refused comment on the plan's substance.

The fraud and tax evasion trial of Khodorkovsky, 41, is a watershed in the Kremlin's relations with the billionaire entrepreneurs who made their fortunes in the chaotic aftermath of the Soviet Union's collapse.

The "oligarchs" carved up huge slices of industry in shady privatisations, and wielded considerable political influence in the late 1990s. But President Vladimir Putin has reined them in.

YUKOS missed a deadline for repayment of $3.4 billion in arrears on July 7. Analysts said the total bill could rise to $10 billion.

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Khodorkovsky's funding of liberal opposition parties is widely assumed to have led to his arrest in October 2003.

As the trial resumed, confusion surrounded YUKOS, the company Khodorkovsky turned into Russia's largest oil firm, after it missed Wednesday's payment deadline. It said it could not meet it while its assets were frozen by the state.

YUKOS's tax bill, including sums still to land in court, now totals nearly $7 billion and it faces a possible rapid selloff of its assets. Its future depends on whether Khodorkovsky and a small core of shareholders can strike a deal that would almost certainly see them relinquish control.

"The government is going to take control over YUKOS in one way or another, directly or indirectly. What's important is the fate of the company after the government takes control," said investment bank Renaissance Capital in a research note.

One international energy watchdog said there would be no impact on Russian oil production from the legal turmoil involving YUKOS, the country's biggest oil exporter.

"Today it's not a worry because so far YUKOS output has not been seriously diminished and, if it is, it will be replaced by other Russian companies," International Energy Agency head Claude Mandil told reporters.

The uncertainty around YUKOS and recent bank failures have tarnished Putin's image as the architect of Russia's economic stability after the tumultuous 1990s, and could threaten future foreign investment.

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