Court Rejects Yukos' Appeal of Seizure

A court on Monday rejected Yukos' appeal against the seizure of one of its main production subsidiaries, the latest in a series of back-and-forth decisions that have sent the beleaguered Russian oil company's stock price on a rollercoaster ride.

The Moscow Arbitration Court left bailiffs' seizure of the assets of Tomskneftegaz in place, the ITAR-Tass and Interfax news agencies reported - the opposite of a ruling by the same court Friday that deemed the seizure of Yukos' biggest production unit, Yuganskneftegaz, illegal.

The decision came Monday evening, after Yukos shares rose 17 percent on Moscow's RTS exchange following the company's court victory Friday.

Yuganskneftegaz was seized by bailiffs in July after Yukos failed to meet the deadline for paying a multi-billion-dollar back tax bill. The Justice Ministry said it was being evaluated for possible sale, stoking speculation that President Vladimir Putin's Kremlin wants to dismember Yukos and turn it over to Kremlin-friendly executives.

Friday's ruling was a rare victory for Yukos and its owners amid a campaign of court cases and tax claims that is widely regarded as a punishment for the growing clout of the company's jailed former CEO Mikhail Khodorkovsky. It came a day after Yukos stock was buffeted - and world crude prices were pushed to new highs - when an announcement by the company that it had been given access to its bank accounts was contradicted less than 24 hours later by bailiffs.

The Kremlin has cast the complex web of court actions against Yukos and Khodorkovsky as a crackdown on tax evasion and shady business activities. But the recent trend of good news followed by bad has only added to suspicions about the government's intentions, as well as prompting claims of shady stock profits based on inside information about the decisions and statements.

In court, Yukos representatives argued that according to the law, bailiffs seeking to collect the tax debt could only seize Tomskneft after first targeting cash and assets not related to production, ITAR-Tass reported.

Analysts had mostly expected the arbitration court to rule the same way on Tomskneft as on Yuganskneftegaz. However, they had said it was possible the court could leave the seizure of the smaller subsidiary in place because it has been part of Yukos for a shorter time than Yuganskneftegaz, the company's core production unit, which accounts for some 60 percent of its oil.

The court also decided Monday that it will consider a Yukos appeal of bailiffs' seizure of a third main production unit, Samaraneftegaz, on Sept. 2, Interfax reported.

Regardless of rulings on the production units - which can be appealed - Yukos is still struggling with its 99.4 billion ruble ($3.4 billion) back-tax bill for 2000.

Late last month, Yukos CEO Stephen Theede warned that its oil shipments by rail could be partially halted in the second week of August unless it was given access to its frozen bank accounts. However, the head of marketing at the country's rail monopoly Russian Railways, Marina Kovshova, said Monday there was no immediate danger of an interruption in Yukos shipments.

Yukos has paid its railway and river barge fees through the end of August, Dow Jones NewsWires reported, citing an unnamed source close to the company. Yukos has said that its bills with state-controlled pipeline operator Transneft are also covered for the same period.

A Yukos spokesman said operations had yet to be affected by reduced liquidity as the bailiffs collect cash from the company's accounts. Bailiffs announced last week that they had collected 22 billion rubles (about $760 million) of the 99.4-billion-ruble bill. The company faces a similar back-tax claim for 2001 and tax authorities are probing its 2002 activities.

The legal actions against Yukos and Khodorkovsky have raised concerns among businesses, investors and foreign governments about Russia's commitment to the rule of law and protection of shareholder and investor rights.


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