Yukos Denied Access to Frozen Funds

Russia's Justice Ministry said Thursday that it had revoked permission _ granted by bailiffs just a day earlier _ for the beleaguered oil giant Yukos to use previously frozen funds to pay for day-to-day operations.

The statement came less than 24 hours after Yukos said it had received permission from the ministry's bailiffs service to use its bank accounts for operational costs, a decision the company said would help it keep it afloat for the time being and make payments on its mounting tax debt.

Yukos had said late Wednesday that it was told its bank accounts were not frozen, and that money in them now or placed there in the future would not be removed. But the ministry said the advice Yukos received from bailiffs was not "based on legal norms" and was being rescinded.

"All funds that have come onto the company's accounts or will come onto the company's accounts will be arrested and transferred to the budget as payment for the debt," the Justice Ministry said Thursday.

It said that Yukos' announcement that its accounts were not blocked amounted to "blackmail." According to the ministry statement, the bailiffs service has sent orders to 11 banks to confiscate money from Yukos accounts.

Yukos shares were down 2.4 percent on the news on Moscow's RTS exchange.

A company spokesman said he had not seen the new statement and would not comment.

In addition to a $3.4 billion back-tax bill for 2000, Yukos faces a similar claim for 2001 and tax authorities are investigating its 2002 activities. Analysts have said the total bill for 2000-2003 could reach $10 billion.

The tax claims, along with the trial of former Yukos CEO Mikhail Khodorkovsky, are part of a web of actions by the Russian state that many observers say are part of a campaign to punish the billionaire for his growing clout and may be aimed to put at least part of the company _ Russia's largest oil producer _ in Kremlin-friendly hands.

Khodorkovsky abandoned a tacit agreement with President Vladimir Putin that business leaders would not meddle in politics, funding opposition parties ahead of last December's parliamentary elections. Russia's richest man also challenged Kremlin policies and was said to have been considering selling a stake in Yukos to a U.S. company.

Yukos has said that it does not have sufficient funds to pay the back-tax claims and has made repeated requests to the government to spread out payments. But there has been no public response from the government, adding to concerns Yukos may be dismembered and its parts sold cheaply as part of a Kremlin effort to gain further control over the economy.

Even after Yukos' upbeat statement late Wednesday _ which helped push crude oil future prices down by 3 percent in New York _ analysts said the government is likely to go ahead with sales of company assets to recoup the tax claims. Bailiffs are currently evaluating Yukos' core production unit, Yuganskneftegaz, for possible sale.

Kakha Kiknavelidze, oil and gas analyst at Moscow brokerage Troika Dialog, said that the swift about-face on the account issue was indicative of a split in the government over Yukos and its fate. "It suggests there are internal tensions in the government. This clearly comes out in public in the form of decisions being reversed," he said.



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