Russia Energy Chief Issues Yukos Warning

A top Russian energy official urged the justice ministry Wednesday to unfreeze the bank accounts of the country's largest oil producer Yukos because its breakdown could see world oil prices soar.

The comments represented a rare piece of good news for Russia's wounded giant since they appeared to win over a senior government official to its cause.

Even so, its implications were not immediately clear and the company's stock dipped half a percent to 3.7 dollars on the benchmark RTS exchange on low volume.

"If the company cannot pay for its equipment" and for its operations "it will have to stop pumping oil," Sergei Oganisyan, head of the federal energy agency that reports to the ministry of industry and energy, told reporters.

"This will hurt world oil prices," he said.

World prices have been hovering at historic highs for days amid confusion over Yukos and uncertainty about Iraq, while consumption soars in the summer season.

The Russian energy official urged the justice ministry "to unblock Yukos accounts so that the company's activities could continue." There was no immediate reaction from the bailiffs.

He said that Yukos had only paid tariffs on its rail shipments and customs duties through Tuesday and that exports could now theoretically halt.

Yukos officials were in urgent meetings and not willing to answer questions on whether the company had actually been forced to stop its exports or production.

Founded by its jailed chief executive Mikhail Khodorkovsky, Yukos produces about 1.7 million barrels of oil per day -- equivalent to about one fifth of Saudi Arabia's output and nearly as much as the maximum that Iraq has pumped recently.

Along with other former Yukos executives, Khodorkovsky -- a top political opponent of President Vladimir Putin -- faces up to 10 years in prison on fraud and embezzlement charges and is forced to watch his company disintegrate and possibly fall into state hands from behind bars.

A decision on the rail exports is critical since they account for a quarter of the company's exports, mostly going to China.

Yukos has said it has paid the Transeft state pipeline monopoly through the end of the month, but it remains unclear if it can keep exporting because the apparent customs problems.

Meanwhile Yukos remains burdened with a 3.4 billion dollar tax bill for 2000 and the sum could grow to up to 10 billion dollars through 2003.

Its market capitalization is now lower than that sum, an irony for a company once regarded as one of the best managed and most transparent in Russia, a darling of the West for being the first to adopt its accounting standards and come clear on who owns what in the company.

But by now, most Western analysts have written Yukos off as an entity.

Yukos has lost rights to the shares of its main producer Yugansk, which accounts for 60 percent of production and is likely to soon be auctioned off, and the future of its two other key producers is uncertain but cloudy.

"The market ex-Yukos has clearly taken summer leave," the United Financial Group remarked.

Instead, analysts are focused on speculation that the news about the company was simply produced by the government or the company itself to make the stock volatile and help insider traders -- some of whom, analysts suggest, work for the state.

"That a false market in the shares has been in operation for a while seems fairly clear to us, and anyone else that is still bothering to watch, we believe," the Renaissance Capital investment bank said in a research note.



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