Kremlin denies Yukos compromise

The Russian justice ministry has gone back on a decision allowing Yukos access to the oil firm's bank accounts to keep its operations running.

The ministry denied having taken a decision to allow Yukos to use the money; it added that the notice sent to Yukos by a bailiff had been irregular.

Furthermore, it said any money coming into the accounts would be "seized or switched" to pay Yukos' tax bills.

Crude oil prices, already rising on Thursday, jumped after the statement.

Concern over the fate of Yukos, which produces one fifth of Russia's oil, has contributed to record oil prices.

Uncertainty

Oil prices fell back slightly from record highs on Wednesday after traders learned that Yukos had a financial lifeline.

Yukos had welcomed the decision to let it dip into the frozen accounts, saying it would enable the firm to "steadily pay off our tax bill".

Oil prices eased as the news lessened the risk Yukos might have to stop pumping oil or declare bankruptcy.

The picture is now much less certain.

Shares in the Russian oil giant fell more than 14% on the Moscow exchange within minutes of the announcement.

The price of a barrel of Brent crude in London rose 73 cents to $40.43 by mid-afternoon on Thursday, while on the New York Mercantile exchange oil was trading up 42 cents at $43.25.

"Yukos is the major story supporting prices," said Nauman Barakat, an executive at US oil analysts Refco.

Yukos has been ordered to pay $3.4bn (£1.8bn) of back taxes for 2000.

Sidestepping a crisis

The company is embroiled in a long-running stand-off with the state over tax evasion. Its founder - Russia's richest man Mikhail Khodorkovsky - is in jail whilst on trial on separate charges of tax fraud and embezzlement.

Foreign governments are thought to have lobbied the Kremlin as oil prices have soared in recent days.

"The government does not want the company's operations to be materially affected by the Yukos affair as that would escalate what is now an internal matter into an international scandal," Renaissance Capital analyst Adam Landes wrote in a research note.

He said the Russian government was likely to ensure that oil production continues.

So far, Yukos has managed to pay $700m of its $3.4bn (£1.8bn) tax bill for the year 2000, and its executives have vowed to try their best to pay off the remainder soon.

But commentators warn that if the government presses on with 2001-2003 tax claims, the bill could end up being as high as $10bn.

Yukos is regarded as one of the most transparent Russian companies, but also in the Kremlin's eyes as one that has gained too much influence and political power.



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