Legal blow for Yukos in tax battle

Russia's largest oil company, Yukos, has lost a legal bid to stop the government from collecting back taxes.

The arbitration court ruling Tuesday, expected by most analysts, appears to send Yukos farther down the road toward bankruptcy.

Yukos wanted the court to suspend a government enforcement order allowing officials to collect roughly $3.4 billion (99 billion rubles) of back taxes from the company.

Formally, Yukos has been given until the end of the month to pay the bill, and some analysts say the government could extend the deadline.

Yukos officials have repeatedly warned that they could be forced to declare bankruptcy and scale back oil exports if the government and courts do not allow the company to sell off some assets to gain cash to pay for ongoing expenses.

Last week, that warning -- coupled with worrying news from other suppliers around the world -- sent the price of oil to new highs.

On Wednesday, Yukos will begin an appeal against the seizing of its key assets.

The Justice Ministry has said it will sell Yuganskneftegaz, which produces nearly two-thirds of Yukos' oil, as payment for the tax bill.

Another concern is the position of the European river carrier Volgotanker, which said on Monday it would not ship Yukos crude on credit in September if the company did not pay.

Volgotanker, which until 2000 was owned by Yukos, gets 40 percent of its 10 million tonnes of annual cargo business from the Russian oil major.

A judicial onslaught against Yukos and its founder Mikhail Khodorkovsky, who fell foul of the Kremlin and is now on trial on charges of tax evasion, has brought the company to its knees. Khodorkovsky's trial is due to resume Wednesday.

HERE