Moscow Court Appoints Yukos Bankruptcy Administrator

by Tatiana Smolenskaya, Tax-News.com, Moscow

30 March 2006

Yukos, once Russia's largest oil firm, faces the prospect of bankruptcy after a Moscow court on Tuesday appointed a bankruptcy administrator.

The Moscow Arbitration Court has set a date of June 27 to decide whether Yukos should be declared bankrupt.

A bankruptcy declaration was sought by a consortium of 14 Western banks, which includes Citigroup, Deutsche Bank and BNP Paribas, after Yukos defaulted on nearly half of $1 billion in debt.

The court approved the transfer of $482 million in Yukos debt from the consortium of banks to Rosneft, the state-controlled oil company which is widely tipped to snap up Yukos' remaining assets.

While Yukos has paid billions to the state in back taxes, and was forced to auction off its main production unit, Yuganskneftegaz, at a knock down price to help reduce its crippling debts, the company still owes the government more than $10 billion of a tax bill which eventually totalled approximately $30 billion.

Yuganskneftegaz was also acquired by Rosneft, and analysts believe that the stripping of Yukos' assets is a deliberate strategy by the administration of President Vladimir Putin to create a massive oil company capable of competing with the likes of Exxon and BP, but closely controlled by the Kremlin.

The former chief executive of Yukos, Mikhail Khodorkovsky, now languishes in a Siberian jail after being found guilty of multiple counts of tax evasion, fraud and money laundering following a highly politicised show trial which many observers believe was a demonstration of power by the Putin government; Khodorkovsky was known to harbour political ambitions of his own.

Yukos has unsuccessfully challenged the right of Rosneft to take over the suit.

The judge also blocked a request by the company's lawyers for more time to review hundreds of pages in documents relating to the case.

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