Russian Justice Ministry Re-Arrests Yukos Subsidiary

by Tatiana Smolenskaya, Tax-News.com, Moscow

13 August 2004

After the Moscow Arbitration (Commercial) Court ruling last Friday that the arrest of Yukos' main production unit, Yuganskneftegaz, by court marshals last month was illegal, the Justice Ministry on Monday rearrested the company's shares. Yuganskneftegaz produces 60% of Yukos's total output of oil.

The company's shares plunged again on the news, after having recovered over the weekend. Yukos now has less than a month left to complete payment of $3.4 billion in back taxes and penalties the tax ministry says it owes for 2000. The tax authorities are also billing Yukos for another $3.4 billion for 2001 and have yet to make assessments for subsequent years.

On Monday, the Russian Federal Energy Agency told the government that it is concerned about the possible suspension of oil production and exports by Yukos in case the company is further denied access to its bank accounts. Agency chief Sergei Oganesian told a press conference: "We have presented the question of unfreezing Yukos's accounts to the government so that the company, which produces 20% of oil in Russia, would not stop pumping its wells."

The government, which has ignored repeated offers from Yukos itself, its shareholders and foreign interests to pay off the company's debts, is presumably immune to such vapourings. Most commentators in Moscow now assume that the government wants control of Yukos's assets, although there are different theories as to what may then become of them.

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