Yukos founder wants govt rep to head board amid bankruptcy warning

Yukos founder Mikhail Khodorkovsky said a government representative should head the board of the oil giant, which warned it would declare bankruptcy within a month unless its huge tax bill was restructured.

"In today's situation I think it preferable to see a representative of the government" as chairman of the board, Vasily Shakhnovsky, a top Yukos shareholder, said Thursday on Moscow Echo radio, on behalf of Russia's richest man who is jailed pending the outcome of his fraud and tax evasion trial.

The offer was the latest in a series of proposals that Russia's largest oil producer has made to the state in order to resolve a tax bill that could eventually come to eight billion dollars.

Analysts say the government has ignored all previous offers because it intends to disassemble the company as payback for Khodorkovsky's political ambitions and a warning to other tycoons to stay out of politics.

Yukos meanwhile said it would be forced to declare bankruptcy within weeks if a court did not lift a freeze on its accounts and assets and if the government goes ahead with its plans to sell its prized asset, the Yuganskneftegas production subsidiary.

"The next three weeks will be very critical for the company's future" because "we will run out of cash and we will not be able to meet our export obligations sometime in the first half of August," chief executive officer Steven Theede told reporters.

Yukos faces a 3.4-billion-dollar (2.8-billion-euro) tax bill for 2000, which it has not been able to pay because of a court-ordered freeze on its accounts and assets.

In all, the tax ministry could end up charging the company with some eight billion dollars in unpaid taxes for 2000-2003, analysts say.

Earlier this week Russian authorities said they would sell Yuganskneftegas -- Yukos's backbone that produces 62 percent of the company's oil and holds 58 percent of its reserves -- to raise cash for the outstanding bill.

In a desperate bid to hold on to its crown jewel, Yukos said it would file for bankruptcy if it were not allowed to raise cash to pay the bill.

"The company management is currently making every effort to raise additional funds in order to repay, as soon as possible, the tax liability and finance current operations," Yukos said in a statement.

"However, should those efforts prove unsuccessful and Yuganskneftegas is sold ... the management of the company would be compelled to announce the bankruptcy of Russia's largest oil company."

"The company is fully capable of repaying the outstanding tax obligations within a reasonable period of time, provided it retains its main production units and can dispose of other assets," the Yukos statement said.

Yukos shares crashed 11.6 percent on the benchmark RTS index within minutes of the announcement.

Analysts said declaring bankruptcy is the oil giant's only hope of stopping the dismantling of a company that last year was an investor darling and whose capitalization was three times today's levels.

"Bankruptcy is their only chance of slowing down the uncontrolled process of an asset firesale," said Steven Dashevsky, head of research at Aton Capital. "During bankruptcy proceedings, all other actions against the company are suspended."

But observers warned that the plan may come to naught -- a company must apply to the courts to be declared insolvent and Yukos has had no luck in the courts during its months-long dispute with the tax ministry.

Theede said Yukos oil will remain on the market through August, the period for which it has pre-paid transport costs to Russia's Transneft pipeline monopoly.

But "if we can't pay pipeline tariffs in September, Yukos crude oil won't be moving through pipelines," he said.

He also warned such a scenario could affect world oil prices.

"Yukos is the first producer of oil in Russia and 75 percent of production is exported, so there will probably be some impact" on world markets, he said.

Yukos produced 589 million barrels of oil in 2003.

Analysts say that Tuesday's announcement that Yuganskneftegas will be sold reveals the government's true intentions toward Yukos, citing as proof the market value of the subsidiary of around 15 billion dollars -- five times more than Yukos's current tax bill.


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