Yukos warns production could halt after accounts frozen

Yukos said its accounts had been seized by the state and that it could be forced to halt production in comments that stoked world oil prices and seemed to ring the death knell for Russia's troubled oil titan.

Russia's number one oil producer said it may go to world courts to save the company founded by Mikhail Khodorkovsky -- the country's richest man who stood in brazen opposition to President Vladimir Putin and who now sits in jail.

Yukos shares dipped two percent to 3.97 dollars on just nine trades on the RTS dollar-denominated exchange amid investor sentiment that the company -- once seen as a Western investor darling -- has finally lost its battle with the state for good.

The company said in a statement that a Moscow court Tuesday granted a prosecutor's request "to seize all resources in accounts belonging to the main producing divisions of the Yukos oil company."

It was already facing a crushing 3.4 billion dollar tax bill for 2000 and its main subsidiary Yuganskneftegaz has been put up for auction amid speculation that it may go to state-linked rival at a cut-rate price.

Yukos produced about 1.7 million barrels of oil per day -- nearly as much as the current maximum output of Iraq and Yugansk accounts for about 60 percent of that figure.

But Yukos said it had been delivered an "astounding" new blow when prosecutors accused the head of its accounting firm of "obtaining by crime" 2.6 billion dollars and illegally keeping the money on Yukos subsidiaries' accounts.

Those have now been frozen.

Analysts said the charges should dramatically lower the valuation of Yugansk which is expected to be announced in about four weeks.

"The arrest of accounts of Yukos oil companies also denies them the ability to pay taxes and other mandatory payments to the budget which seriously impacts the financial standing of the regions of the company's main operations," the Yukos statement said.

It accused prosecutors of leading a campaign to bankrupt the giant so that it can fall into state hands and profit a group of Kremlin hawks who served in the security services and lost out in lucrative but murky privatization deals of the 1990s.

"Every legal recourse will be taken both in Russian and international courts in order to protect the company and thousands of its employees from arbitrary actions by certain officials," Yukos said.

Investors fear the fate of Yukos may be the test case of whether private property is safe under a Putin regime that has relied on a heavy role for the state.

But one analyst said that a shutdown of production was unlikely because it would discredit Putin on the world arena.

"Any production halt would be so embarrassing for the president after his clear commitment on the issue earlier this week that the company will be allowed access to cash to cover essential operating costs," said Alfa Bank analyst Christopher Weafer.

"The fact that Yukos was making greater headway in paying off the 2000 tax bill is simply not playing by the rules," he said. Yukos said it paid two billion of the 3.4 billion dollar bill by September 1.

Concern about a possible halt in production by Yukos was one factor pushing world oil prices to record high levels in August.

Russian authorities then assured the oil market that Russian oil production would continue to increase.

The price of benchmark Brent North Sea crude oil for delivery in October rose 73 cents to 42.20 dollars a barrel in afternoon trading in London.

New York's reference light sweet crude for October delivery gained 60 cents to 44.60 dollars in pre-opening electronic trading.

"It seems that jitters about Yukos have caused the surge," said one trader in London.

HERE