Russia Revokes Yukos Bank Access
Reversal Raises Fresh Fears
Of Disrupted Oil Exports;
Crude Prices Hit New Highs
By GUY CHAZAN
Staff Reporter of THE WALL STREET JOURNAL
August 6, 2004; Page A2
MOSCOW -- Russian authorities revoked a decision allowing OAO Yukos to use its bank accounts to pay day-to-day operating expenses, raising fresh fears its oil exports might be disrupted and helping to push oil prices to new highs.
The government's about-face, which reversed a decision made just the day before, ended a fragile reprieve that would have eased pressure on Yukos as it struggles to pay a potentially crippling 99 billion ruble ($3.39 billion) back-tax bill for 2000. Yukos, Russia's biggest oil producer, warned two weeks ago that it would run out of cash by mid-August if its accounts remain frozen, forcing it to stop production.
A Yukos spokesman, Alexander Shadrin, said the company hadn't received any official notification from the Justice Ministry and assumed the accounts still were unfrozen.
The government's flip-flop created jitters in a market already worried that world demand for oil may be overtaking production capacity, sending futures prices in New York and London to new highs. September crude-oil futures rose $1.58 to $44.41 (€36.89) a barrel on the New York Mercantile Exchange. In London, September futures rose $1.42 to $41.12. (See related article1.)
Oil prices had eased after Yukos announced late Wednesday that court bailiffs had told the company it could make monthly payments from its bank accounts to finance current operations.
Yesterday, the Justice Ministry issued a statement saying the bailiffs' decision was illegal and had been rescinded. "All funds that have entered and will enter the company's accounts will be confiscated by the court bailiffs' service and transferred to the budget in settlement of the [tax] debt," the statement said.
It also accused Yukos of waging a campaign to "pressure and blackmail the authorities" by claiming it now could access its cash reserves.
The uncertainty played havoc with Yukos's share price, which had risen more than 10% on the company's earlier announcement, then slumped after the Justice Ministry intervened. Yukos shares fell 2.3% to $4.25 on the RTS, Russia's main trading system.
A person close to the company said the ministry's move showed that efforts to negotiate with the government on settling the tax claim without bankrupting Yukos thus far have failed. "This isn't about money, and it's not about taxes, clearly, and that's why it's impossible to resolve," the person said.
The person said the move has convinced Yukos management that there was an internal power struggle inside Vladimir Putin's administration between hardliners who wanted to destroy the company and liberals in favor of a negotiated settlement. The Kremlin itself hasn't revealed its plans for the company, saying settlement of the tax bill was the responsibility of the tax authorities and the courts.
The authorities' attack on Yukos, which has also been presented with a huge tax bill for 2001 and is expected to be given additional bills for 2002 and 2003, has coincided with the trial of the company's founder and former CEO, Mikhail Khodorkovsky, Russia's richest man, who is facing charges of fraud and tax evasion. The trial is widely seen as a Kremlin-orchestrated campaign against a man whose aggressive political ambitions irked President Putin.
The justice ministry also said it was continuing the process of valuing OAO Yuganskneftegaz, Yukos's biggest production unit, which the government announced last month it planned to sell to pay off the tax debt. Yuganskneftegaz produces about one million barrels of crude a day and is valued at least $30 billion. But Yukos executives expect the state to sell it off at a fire-sale price.
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