Russian oil giant facing bankruptcy

A Russian court delivered a hard blow to the Yukos oil giant today, upholding a €2.9 bn tax bill and bringing the beleaguered oil company a big step closer to insolvency.

Yukos, Russia’s second-largest oil producer, has three months to pay the bill or it may face bankruptcy proceedings.

But despite the major setback, the market reacted calmly, apparently hoping that the Kremlin will intervene in what many allege was a politically motivated assault from the beginning.

The tax case was just one of a myriad of claims against Yukos and its former CEO, Mikhail Khodorkovsky.

Analysts see the web of court cases as a Kremlin-directed move to punish Khodorkovsky, Russia’s richest man, for his funding of opposition parties and to ensure that such a key firm in Russia’s strategically important oil sector is in the hands of someone more loyal.

The Moscow Arbitration Court’s decision today gives bailiffs the right to start operations to confiscate Yukos assets from banks as soon as the ruling is published, Yukos lawyer Sergei Pepelyayev said.

“There are illegal decisions and there are blatantly illegal decisions and this is the latter, so we’ll recommend that our client appeal,” he said.

Lacking the cash to pay the bill upfront and hampered by a court order preventing it from selling its assets, Yukos has also boosted efforts in recent days to seek an out-of-court settlement with the tax agency.

But so far, the company says it has received no reply from the government to tentative proposals to stagger its payment over a longer period.

Representatives of the Yukos defence team told the Interfax news agency that the Tax Ministry would receive a writ within one to three days confirming that Yukos does not have sufficient funds to pay the bill – after which court bailiffs could move in.

Yukos has two months to appeal the ruling to the Federal Arbitration Court of the Moscow Region, and Pepelyayev said that court could decide to suspend any requirements to pay pending a new court decision.

The Tax Service claimed Yukos ran up the tax bill in 2000 through the misuse of onshore tax havens. Yukos said that any tax schemes it used were legal, and it contested the claim.