Yukos Faces Ruin as State-Run Rosneft Wins Case

OAO Rosneft, Russia's state oil company, won a claim for 62.4 billion rubles ($2.2 billion) from OAO Yukos Oil Co., raising the prospect the government will seize the last oil fields of what was once the country's biggest crude exporter.

Rosneft's victory today in the Moscow Arbitration Court came as prosecutors said they will file new charges against Mikhail Khodorkovsky, the jailed Yukos owner awaiting a verdict in his trial. The suit is one of three Rosneft filed seeking more than $12 billion from Yukos for damages to OAO Yuganskneftegaz, a Yukos unit Rosneft acquired in December.

President Vladimir Putin's government is tightening its control of the nation's energy industry, the world's largest. The government jailed Khodorkovsky in 2003 and seized and sold Yukos's biggest asset last year, raising concern in Europe and the U.S. about property rights and the rule of law.

``Putin once famously said that once you start a fight you should see it through right to the end,'' said Michael Heath, an analyst at Aton Capital Group in Moscow. ``The new charges against Khodorkovsky and the $2.2 billion in damages against Yukos are designed to ensure his opponent does not get back up off the mat.''

Shares Drop

Yukos's shares fell 7.6 percent to 14.70 rubles in Moscow, cutting the company's market value to about $1.2 billion. The shares have lost 97 percent of their value from a high of 483.90 rubles before Khodorkovsky's arrest in October 2003.

The stock had soared 17 percent in the last week of April after Moscow's Meshchansky District Court on April 27 postponed delivering its verdict on Khodorkovsky, causing some investors to speculate that Yukos's owners or managers might be able to reach a settlement with the government.

``The only reason Yukos is still trading at above $1 billion was because some people thought there could be a deal that would leave at least part of the company intact,'' Chris Weafer, chief strategist at Moscow-based Alfa Bank.

The Moscow Arbitration Court last month froze Yukos's remaining oil-producing assets in response to suits filed by Yugansk, which claimed Yukos's actions lowered its revenue and profit and made it liable to tax claims.

Yukos's oil output totaled 500,000 barrels a day in April.

Yugansk is seeking 163.1 billion rubles in lost profit and 141.2 billion rubles for tax charges. The case on the tax charges will be heard June 10, Interfax reported today.

The arbitration court froze Yukos's three remaining production units, according to a copy of a court ruling obtained by Bloomberg. That ruling related to the case over missed profit.

New Charges

The Prosecutor General's Office said today it plans to charge Khodorkovsky and his partner Platon Lebedev with laundering billions of rubles, a spokeswoman for the office said in a telephone interview, citing Natalia Vishnyakova, the head of the press service.

Khodorkovsky said the new charges will further damage Russia's investment climate.

``I really hope these unscrupulous officials won't be allowed to further wreck Russia's reputation as a lawful state,'' Khodorkovsky said in a statement posted on http://www.khodorkovsky.ru , a Web site run by his lawyers.

The Prosecutor General's spokeswoman declined to say when new charges could be brought.

No Return

``We've reached the point of no return for Yukos,'' said Jean-Louis Tauvy, who manages $200 million at Atria Advisors in Moscow. ``Rosneft is the most likely candidate'' to gain control of Yukos's assets.

Moscow's Meshchansky District Court is scheduled to deliver its verdict on Khodorkovsky in hearings that will start May 16.

Russia's most publicized trial since the Soviet era is being closely followed in Washington, which views it as a key test of Russia's legal system, U.S. Secretary of State Condoleezza Rice said last month.

``Everyone will be watching to see what the Yukos case says about the rule of law in Russia,'' Rice said in an April 20 interview with Echo Moskvy radio when she visited Moscow and met with Putin.

Rosneft

The court today ordered Yukos to pay Rosneft for oil it received from Yuganskneftegaz in the second half of last year and never paid for, Yukos spokesman Alexander Shadrin said.

``We didn't pay because of force-majeure,'' Shadrin said in a telephone interview in Moscow today. ``Our accounts were frozen and the tax authorities were withdrawing the amounts that we would have paid.''

Rosneft spokesman Alexander Stepanenko declined to comment when called on his mobile telephone.

The government said last year it will raise its stake in OAO Gazprom, the world's largest natural gas producer, to more than 50 percent from 38 percent by swapping Rosneft for Gazprom shares held by the gas company's subsidiaries.

Rosneft's purchase of Yugansk raised litigation risks, delaying Gazprom's plan to take over Rosneft, which the government is reviewing.

Officials close to Igor Sechin, Rosneft board chairman and deputy head of Putin's administration, want Rosneft to retain Yugansk and swap only part of Rosneft for the Gazprom stake, Kommersant reported April 19.

Putin's chief of staff, Dmitry Medvedev, is chairman at Gazprom.

(From Bloomberg, 5.13.2005)