Yukos on brink of ruin - chairman

Crisis-hit Russian oil giant Yukos has warned it is on the brink of ruin after tax authorities froze its accounts and threatened to seize its assets.
Chairman Victor Gerashchenko claimed the moves, aimed recovering up to $7bn in back taxes, would paralyse the firm.

"This could drive the company into the ground," he told reporters.

The freeze has left the firm - which says it has just $1bn in cash - unable to access its oil revenues or pay customs for the right to pump oil.

In a one-hour visit to the group's Moscow headquarters on Thursday, bailiffs gave the company just five days to pay a $3.4bn back taxes bill for 2000.

Bankruptcy fears

Hours later Russian authorities issued another tax demand, again for $3.4bn, in relation to money owed for 2001.

Investigations into the group's finances for 2002 and 2003 are still ongoing and could result in further demands.

The bills relate to accusations that Yukos misused domestic tax havens to underpay its taxes, but the firm has argued that the practice was legal at the time.

Yukos warned the liabilities could lead to bankruptcy , while the assets freeze could see some of its oil fields cease output next week.

The group's continuing troubles have seen brokers downgrade its stock, while shares in the company have plummeted more than 20% in recent days.

In late afternoon trade Yukos had fallen 16.88% to $6.65 on the benchmark Russian RTS index.

'Stupidity, provocation'

On Thursday, Yukos had offered to give up its stake in smaller rival Sibneft, thought to be worth around $4.2bn, to pay off its 2000 tax bill, but bailiffs rejected the offer.

Measures taken against Yukos seem to contradict President Vladimir Putin promising last month to do all he could to prevent its collapse.

Following news that a Moscow court had upheld the assets freeze order, Mr Gerashchenko said: "This is stupidity and a provocation after the president said he did not want to see the company go bankrupt.

"The bailiff's refusal to take the Sibneft share was stupid," he fumed.

Mr Gerashchenko - a former central bank chief who investors had hoped would have some sway with the Kremlin - also revealed his calls to top officials had been ignored.

'Posturing'

"I rang (Kremlin chief of staff Dmitry) Medvedev, (prime minister Mikhail) Fradkov, and (finance minister Alexei) Kudrin yesterday.

"They didn't return the calls. First they were busy, then they were in different types of meetings.

Earlier, Alexandre Nekrosov, former advisor to President Boris Yeltsin, told the BBC's Today programme that much of the present discussion was "posturing".

"Nobody really wants to bankrupt the company," he said. "I would say everyone is terrified of Yukos - which produces 4% of the GDP of Russia - going bankrupt."

Rather, the belief among many observers is that the government wants to force Yukos' owners to cede control.

Yukos currently pumps almost one barrel in every five that Russia produces - 1.7 million barrels a day in June.

Payback

Along with the now-routine security concerns, the crisis at the firm helped drive oil prices up more than $3 a barrel on Wednesday and Thursday.

Prices fell back on Friday, down 0.7% to $35.81 in London and $38.46 in New York.

Yukos' legal troubles are widely seen as revenge for the political ambitions of major shareholder Mikhail Khodorkovsky, arrested last year.

Mr Khodorkovsky is on trial on charges of fraud and tax evasion, as is Platon Lebedev, chairman of Menatep Group - the vehicle through which Mr Khodorkovsky controls Yukos.

On Thursday Mr Lebedev was moved from a medical ward to a common cell with up to 20 other inmates.

The move, his lawyers said, was designed to apply pressure on him and "deprive him of the possibility of taking an active part in the trial".

HERE