Russia Says Yukos Can Ship Oil
Amid Asset Freeze in Tax Case
Market Concerns Abate,
But Kremlin Shows No Sign
Of Letting Up on Producer
By GREGORY L. WHITE
Staff Reporter of THE WALL STREET JOURNAL
July 30, 2004
MOSCOW -- Russian officials confirmed Thursday that OAO Yukos can continue to produce and ship oil despite asset freezes ordered in its back-taxes case, reassuring nervous world energy markets somewhat. But the Kremlin offered no further sign that it would ease pressure on the embattled oil giant.
Oil markets jumped Wednesday, leading to 21-year highs for crude-oil futures in New York, after Yukos said a recent court order could be interpreted as requiring Russia's No. 1 oil producer to cease pumping. Late Wednesday, a government official accused Yukos of overdramatizing the situation. On Thursday, oil markets relaxed somewhat, and U.S. benchmark crude futures in New York fell 15 cents to $42.75 per barrel.
At the same time, Yukos has yet to hear from court officers on whether it would get permission to gain access to cash in bank accounts through which much of its export revenue flows. It had hoped to get permission Thursday, but company officials said no word came. Yukos has warned that without access to the accounts, it will run out of cash by the middle of next month.
Publicly, Yukos officials remain upbeat about their prospects for working out a deal with the government to pay off the taxes without bankrupting the company.
"I still feel that there are proactive things that can be done to save the company," Chief Executive Stephen Theede said Wednesday after a visit to the company's Siberian oil fields. "As soon as I stop believing that, we might as well give up." In a news release Thursday, he said he "remains hopeful" a "satisfactory resolution of the tax issues" can be achieved.
But a person close to the company said another settlement offer to Kremlin officials this week appears to have gone unanswered. On Wednesday, Mr. Theede said: "There haven't been any substantive discussions that have taken place that would lead us to believe there is a willingness to work with the company toward a settlement."
Many of Yukos's accounts and assets were frozen under court orders as part of the process of collecting a 99 billion ruble ($3.39 billion or €2.82 billion) claim for back taxes for 2000. Mr. Theede said the company will have paid about $700 million by the end of this week.
Tax authorities say the company owes another 98 billion rubles for 2001, and that additional charges are likely for later years. Yukos denies it underpaid taxes, but has offered to pay as much as $8 billion over two years to settle all tax claims. The government so far hasn't responded to the offer.
For the moment, Yukos continues to produce oil and operate normally, according to company officials. Mr. Theede said the company's $1.9 billion capital-spending program for this year hasn't been substantially cut but is under review.
Yukos shares rebounded 19% Thursday after plunging 20% a day earlier.
Russian officials say they are going ahead with plans to sell Yukos's main unit -- a Siberian giant that produces one million barrels of crude a day -- to pay off the tax debts. Yukos officials say selling the unit would likely bring the whole company to a halt.
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