Sun, Aug 08, 2004 - Page 11 News List

Court decides seizure of Yukos assets was illegal

SMALL VICTORY The embattled Russian oil giant, which has been on the verge of death for some time now, got a reprieve and will live to fight another day

AP , MOSCOW

A Moscow court handed the struggling oil giant Yukos a significant victory by ruling that bailiffs' seizure of a key subsidiary was illegal.

The subsidiary, Yuganskneftegaz, which accounts for some 60 percent of Yukos' oil production, was seized last month after Yukos failed to meet the deadline for paying a 99.4-billion-ruble (US$3.4 billion) back taxes bill.

After the seizure, bailiffs said Yuganskneftegaz was being prepared for possible sale, a statement that appeared to support analyst speculation that the Russian government aims to dismantle the country's largest oil company and sell the pieces into Kremlin-friendly hands.

However, a Moscow Arbitration Court judge ruled late Friday that bailiffs had violated legislation in the seizure, according to the ITAR-Tass news agency. Yukos lawyers had argued that such a seizure could not take place before property not related to oil production had been used to satisfy the tax claim.

Yukos spokesman Alexander Shadrin said the company was satisfied with the decision, but would reserve further comment until seeing details of the ruling.

Punish the billionaire

The tax claim against Yukos and the jailing of its former CEO Mikhail Khodorkovsky are part of a web of legal actions that many observers say are part of a campaign to punish the billionaire for his growing political clout and his funding of opposition parties.

Earlier Friday, a group of Russian investment banks offered Yukos US$450 million for its stake in a multinational gas joint venture, a proposal that could help the company raise money to pay off the crippling back taxes bill.

The offer by the Alfa Services group followed earlier suggestions from Yukos that it would sell its stake in Rospan International.

In a statement carried by the Interfax news agency, Alfa Services proposed buying Yukos' 56-percent stake in Rospan, a joint venture with Anglo-Russian oil company TNK-BP.

Alfa Services, which said it was already owed US$35 million by Rospan International, said it would pay the money from the sale directly to bailiffs trying to collect the back taxes. The group also offered to buy two of Yukos' smaller gas subsidiaries.

Alfa Services has no relation to Alfa Group, which co-owns TNK-BP, Dow Jones NewsWires said.

TNK-BP earlier said it was willing to buy out Yukos' stake in Rospan for US$357 million.

Bankruptcy

Yukos has said it does not have enough ready cash to pay its tax bill, and a court order prevents it from selling assets to raise cash. The company has warned that the bill could drive it into bankruptcy unless other payment arrangements can be made.

The company also says it has made repeated proposals to the government to spread out payments, but there has been no public response.

Yukos produces about 2 percent of the world's oil and fears that its exports could be disrupted have contributed to a spike in world oil prices. In Friday US trading, September contract prices dropped US$0.66 to US$43.75 a barrel, but it was not immediately clear whether the market was reacting to the Moscow court decision.

`Very positive news'

An analyst with the Troika Dialog brokerage in Moscow, Kakha Kiknavelidze, said that Yukos still could face production problems because its bank accounts are frozen, potentially leaving the company without enough money to keep operations going. In general, however, he said the court decision was "very positive news."

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