Yukos Oil Co, once Russia's biggest oil exporter, lost its bid in a US court to thwart the confiscation of assets by Russia's government, scuttling plans to sue Deutsche Bank AG and other lenders.
Given Yukos's importance to the Russian economy, the case should be heard in a court that would be more convenient for government officials and creditors, US Bankruptcy Judge Letitia Clark ruled on Thursday in Houston, dismissing Moscow-based Yukos's Chapter 11 petition.
Barring a successful appeal, Yukos will fail to get legal redress against banks and the government, which seized and auctioned Yukos's main oil-producing unit for US$9.34 billion in December. Russian President Vladimir Putin plans to auction other assets to recover US$28 billion of tax claims disputed by Yukos.
The ruling "effectively removes one of Yukos' last desperation plays," said Donald Coxe, who helps manage US$21 billion of assets as chairman and chief strategist at Harris Investment Inc in Chicago.
"Yukos will probably be swallowed into the maw of Mother Russia," Coxe said.
The US court's ruling follows a year-long conflict between Putin's government and Yukos that left the shares almost worthless, former Chief Executive Mikhail Khodorkovsky in jail and oil near record highs on concern about disruptions to Russian exports.
Yukos sought Chapter 11 protection in Houston on Dec. 14 and won an emergency restraining order blocking the Russian government's auction of Yuganskneftegaz, the company's Siberian oil production unit, which accounts for roughly 60 percent of Yukos's assets.
The Russian government ignored the restraining order and auctioned the unit, which is now owned by OAO Rosneft, Russia's state-run oil company.
Dismissal of the petition removes a potential irritant in the relationship between the US and Russia at a time when US President George W. Bush is urging Putin to fulfill his country's commitment to democracy. Yukos claimed that the Russian tax authorities intended to take over the entire company and strip it of its assets.
"If it had gone the other way, there would have been certain retaliation against US companies in Russia," BMO Financial Group's Coxe said. "No US oil company would have been safe."
Russia, the world's largest producer of oil and gas, plans to ban foreign companies from bidding for large deposits of oil and metals, including the Sakhalin-3 oil fields sought by the US's Exxon Mobil Corp and ChevronTexaco Corp. Only companies at least 51 percent Russian-owned will be allowed to bid for the sites, a spokesman for the natural resources ministry said on Feb. 10.
As part of the bankruptcy filing, Yukos sued Deutsche Bank, Gazprom and other Russian companies for US$20 billion, claiming that they "expropriated" Yuganskneftegaz. The company also sued the Russian government for violating the restraining order.
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