Tax Service Raises 2001 Yukos Bill to $4.1Bln

The Federal Tax Service slapped Yukos with a $4.1 billion back-tax bill for 2001 on Friday, $700 million more than its original claim, which was announced July 1.

The amended bill, the largest in Russian history, raises the total demand against the company for the years 2000 and 2001 to $7.5 billion and comes as the Justice Ministry prepares to sell Yukos' main production unit.

Additional claims for subsequent years are expected.

Yukos spokesman Alexander Shadrin said tax officials delivered the bill Friday and gave the company until the end of the day to pay it off, which it failed to do. He said Yukos would contest the bill in court.

The Federal Tax Service issued a statement saying Yukos falsely attributed oil sales to related companies registered in regions offering tax benefits. As a result, it said unpaid taxes and fines total 119.9 billion rubles.

A spokesman for the service declined to comment on the deadline for paying the new bill, which came just two days after the deadline expired on a $3.4 billion bill for the year 2000, with $1.4 billing still outstanding.

The next day, Thursday, Yukos said that it would be forced to stop producing oil after a Moscow court had ruled to freeze up to $2.6 billion of funds entering the accounts of production units.


Those units, particularly Yuganskneftegaz, which accounts for most of Yukos' production, have become targets in a clash between President Vladimir Putin and Yukos founder Mikhail Khodorkovsky, who is currently being tried on charges of tax evasion, fraud and leading an organized criminal group.

"The authorities are trying to increase the claims to make the highest possible back-tax bill while putting pressure on Khodorkovsky and his team," said Caius Rapanu, senior energy analyst at NIKoil in Moscow.

Yukos faces a spiraling tax bill: The Federal Tax Service is probing the company for 2002, and prosecutors last month confiscated documents relating to 2003 and 2004, raising the prospect of additional bills, possibly even against Yukos' units, which are also being probed for 2002.

Boosting tax claims against the company puts pressure on Group Menatep, Yukos' core shareholder, as investment bank Dresdner Kleinwort Wasserstein values Yuganskneftegaz for possible sale by the government.

Many investors said they expect tax claims against Yukos to keep rising until they total what Yuganskneftegaz can be fairly sold for -- most likely to a company or companies close to the Kremlin.

"At this stage it is difficult to surprise Yukos with new tax claims," said Yukos spokesman Hugo Erikssen.

News of the increased claim hit just as much of the world was watching the tragic events unfold in the deadly hostage siege in Beslan, North Ossetia.

According to the Federal Tax Service, Yukos used organizations registered in the republic of Mordovia, the republic of Kalmykia and the northern Siberian autonomous district of Evenkia.

"The company deliberately took actions to artificially document turnovers of oil and oil products through specially created organizations registered in Russian regions and towns, illegally presenting additional tax breaks," the service said in the statement.

Confirming the 2001 claims may take time. It took Yukos six months to exhaust its appeals over the 2000 bill, which was announced Dec. 29.

"This could well take several months to enforce as Yukos is likely to appeal the decision and the procedure takes a long time," said Sergei Suverov, head of equity research at Bank Zenit. "The bill is higher than expected and there will be additional demands against the company and its units."

Located in western Siberia, Yuganskneftegaz is the basis for the name Yukos. The subsidiary pumps about 1 million barrels of oil per day, more than Libya, and accounts for two-thirds of Yukos' output.

"The end of the story will entail dismantling Yukos, and Menatep will lose all control over the company," said Rapanu from NIKoil.

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