The political case Yukos

July 22 (Bloomberg) -- OAO Yukos Oil Co., Russia's biggest oil exporter, holds a briefing in Moscow today amid speculation the company may file for bankruptcy to prevent the state from seizing and selling its assets to help pay $3.4 billion in taxes.

The management board met late yesterday and called a press conference for noon Moscow time, with Chief Executive Officer Steven Theede in attendance. A spokeswoman in London, Claire Davidson of the Policy Partnership, which is representing Yukos, declined to comment on the company's plans and the briefing.

``If they declare bankruptcy it would be good news because it would protect the company from creditors for a certain period and prevent impairments to their assets,'' said Alexander Branis, who co-manages about $550 million at Prosperity Capital Management, one of Yukos's largest investors. ``It's worth a try.''

Yukos Chief Financial Officer Bruce Misamore on a July 6 conference call said bankruptcy ``may be an option'' to protect Yukos. The company, which has no more than $1.4 billion in cash, failed to meet a July 7 deadline to pay $3.4 billion in taxes from 2000, the largest fine in Russian history. Russia Tuesday seized OAO Yuganskneftegaz, which pumps 60 percent of Yukos's oil and is valued at $20 billion by Goldman Sachs Group Inc.

New York crude oil prices have risen 9.6 percent this month, partly on concern that supplies from Russia, the world's second- largest oil exporter next to Saudi Arabia, may fall because of the government's dispute with Yukos, which pumps more oil than Libya, the eighth-biggest producer in OPEC.

A Moscow court has issued an arrest warrant for Yukos billionaire Leonid Nevzlin on charges he organized a double contract killing and a string of attempted murders.

Nevzlin, who was Yukos owner Mikhail Khodorkovsky's right-hand man, has been charged with "entering into a criminal plot with Yukos' internal and economic security chief Alexander Pichugin to kill certain individuals who posed a ... danger to the company, and to Nevzlin and Pichugin," the Prosecutor General's Office said in a statement issued Monday.

News of the arrest warrant, which was sanctioned by Moscow's Basmanny Court on Friday, comes in the wake of nearly a year of mounting pressure on Yukos' majority shareholders, including the jailing of Khodorkovsky last October on charges of fraud and tax evasion and a government announcement last week that it was preparing to sell off the oil firm's majority stake in its core production unit to pay off tax debts.

Yukos shares plummeted more than 21 percent on the Russian Trading System on Monday, as investors scrambled to get out of the stock ahead of the company's possible breakup. The shares closed at $4.20, down a total of 50 percent since last Tuesday's announcement that Yuganskneftegaz would be sold off.

The new charges against Nevzlin mark the first time that any of Yukos' major shareholders, including its jailed former CEO, Mikhail Khodorkovsky, have been charged with anything other than economic crimes.

Nevzlin, whose personal wealth is estimated by Forbes at $2 billion and now lives in self-imposed exile in Israel, has been on an Interpol wanted list since January on fraud and tax evasion charges issued by Russian prosecutors.

In his first public comments on the legal campaign against Yukos' owners last September, President Vladimir Putin stated there could be worse charges to me. "The case is about Yukos and the possible links of individuals to murders in the course of the merging and expansion of the company," he said. "In such a case, how can I interfere with the prosecutors' work?"

Nevzlin's lawyer Dmitry Kharitonov said Monday he would appeal the court's decision that, he said, he was only informed of after it had been taken.

Kharitonov said Nevzlin had reacted very negatively to the charges when he was told about them on Friday. An aide said Monday that Nevzlin would not comment on the charges.

Khodorkovsky on Monday called the charges "monstrous." "Nevzlin is my friend," his lawyer Anton Drel cited him as saying, Interfax reported. "I very much regret that some people ... are using such monstrous methods and accusations to achieve their aims."

Prosecutors said Monday that Nevzlin had been charged with conspiring with Pichugin to stage a mugging in a failed attempt in 1998 to kill "V. Kolesov," a former property chief at the Rosprom financial-industrial group that at the time held assets belonging to Khodorkovsky and his partners.

The head of Russia's largest oil producer says the company, battered by a gigantic overdue back taxes bill, may have to halt some oil exports by early next month.

Steven Theede, chief executive of the Yukos oil company, said that shipments by rail, which account for about one quarter of its exports, could be halted in the second week of August unless the government allows Yukos access to its frozen bank accounts, the reports said.

Yukos exports about 55 million barrels of oil a year to China via rail; the company's other exports go primarily to Hungary, Poland, Slovakia and the ex-Soviet Baltic countries.

Yukos owes the government 99.4 billion rubles ($A4.87 billion) in back taxes for the year 2000. The company says it does not have the ready cash to pay the debt and court orders have frozen assets that it could tap to raise money.

Its officials repeatedly have warned that the company, which produces two per cent of the world's oil, is being driven toward bankruptcy.
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Yukos has proposed compromises such as being allowed to pay the bill over a period of several years, but the government has given no public indication that it is considering a compromise.

Bailiffs said this month that Yukos' largest production subsidiary, Yuganskneftegaz, is being prepared for sale to settle the bill.

Many analysts speculate that the government's goal is sell of pieces of the company into Kremlin-friendly hands.

The tax case is part of an array of legal actions against Yukos and its former chief executive Mikhail Khodorkovsky that are widely seen as a Kremlin-led drive to punish Khodorkovsky for funding opposition political parties and to stifle his presumed political ambitions.

Khodorkovsky, who was arrested in October, and associate Platon Lebedev are on trial on charges of forgery, fraud and tax evasion.

Fears that Yukos or its assets could be turned over to Kremlin-friendly executives intensified on Tuesday when the state-owned oil company Rosneft said Igor Sechin, a deputy head of President Vladimir Putin's administration, had been appointed its chairman of the board.

As Yukos' difficulties intensify, its stock is falling precipitously, losing more than 20 per cent in Moscow trading on Monday and falling another 15 per cent on Tuesday.

In early trading today, shares nosed up about 1.4 per cent after an initial dip.

Oil prices have hit their highest level in at least 21 years after bailiffs ordered beleaguered Russian oil giant YUKOS to stop sales, threatening further strain on tight international supplies.

The news on Wednesday intensified concerns over the lack of spare capacity in the international oil system, as the OPEC cartel pumps at its highest level for a quarter of a century to meet strong global demand growth.

Gains accelerated after a weekly U.S. government report showed just a small build in crude stocks and a fall in gasoline inventories even though crude imports into the country were at the highest weekly level ever.

U.S. light crude rose $1.21 to $43.05 a barrel -- topping peaks hit in early June and the highest price since the New York Mercantile Exchange launched the contract in 1983. London Brent crude rose $1.06 a barrel to $39.60 a barrel, its highest level since October 1990, ahead of the first Gulf War.

Prices jumped after a company source said Russian bailiffs told YUKOS' four production units, which together pump 1.7 million barrels a day of oil, to halt sales of property -- including oil.

YUKOS said it had not complied with the order and was continuing to operate while it sought clarification of what chief executive Steven Theede called a "misinterpretation".

YUKOS has said it faces imminent bankruptcy as courts seek to enforce a $3.4 billion tax debt for 2000.

The company pumps around a fifth of crude supply in Russia -- the world's second biggest oil exporter behind Saudi Arabia after five years of rapid production growth.