Yukos

Published: October 16 2004 03:00

Censors banned the horror film Texas Chain Saw Massacre on its release in 1974. Today, its capacity to shock is much diminished. The Yukos saga has displayed similar characteristics. The government's plan to sell assets seized from the Russian oil group at a knockdown price is the latest instance. Investors have grown accustomed to each proposed outrage becoming a reality. The first multi-billion dollar tax claim against the company was a shock, as was the seizure of Yuganskneftegas (YNG) in lieu of back taxes. Just because the latest action appears outrageous does not mean it will not happen.

At each point in the sorry tale there is much confusion. Investors have been horrified by the rumoured $4bn price for YNG. The Kremlin might suggest, in fact, a value nearer to $10.4bn - the lowest possible figure in Dresdner Kleinwort Wasserstein's valuation for the Ministry of Justice. No doubt investors would be relieved by this higher figure. Even DrKW described its valuation of $10.4bn as "overly conservative", saying fair value is several billion higher.

Whether it is $10bn or $4bn, YNG will be sold below fair value. Indeed, the lower the price, the easier it will be to justify claiming further Yukos assets to meet tax demands. There is one clear trend amid the confusion. From the moment Mikhail Khodorkovsky, Yukos's major shareholder, was arrested, the assault on his Russian assets has been relentless. There may be further outrages still to come.

(From : The Financial Times)