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Russia: Time Running Out For Deal As Yukos Faces Tax Deadline

  • Kathleen Moore

http://gdb.rferl.org/B464A9F0-D041-4B3D-9629-2DF5C26FB6A4_w203.jpg --> http://gdb.rferl.org/B464A9F0-D041-4B3D-9629-2DF5C26FB6A4_mw800_mh600.jpg Mikhail Khodorkovskii (file photo) The clock is ticking for Russia's largest oil producer, Yukos. It has until tomorrow to pay $3.4 billion in back taxes before the Tax Ministry can start seizing its assets. As the deadline looms, Yukos's former chief, Mikhail Khodorkovskii, is reported to have offered a fresh proposal to rescue the oil giant.

Prague, 7 July 2004 (RFE/RL) -- Reports of an offer to rescue Yukos came at the last minute for the oil giant.

The firm has until tomorrow to pay $3.4 billion in tax arrears for 2000 -- a payment Yukos says could send it into bankruptcy.

Today’s "Financial Times" newspaper said Mikhail Khodorkovskii, Yukos's former chief executive, has offered to hand over all or part of the 44 percent Yukos stake he and his partners hold through another company, Menatep. In return, Yukos would get three years to settle all of its tax debts, which authorities say currently stand at some $7 billion.

There's been no confirmation yet from Russian government officials that they have even received the reported offer.

Yesterday there were mixed signals on whether the authorities are willing to negotiate a deal. First, Deputy Finance Minister Sergei Shatalov suggested Yukos could be given more time to pay.

But then Prosecutor-General Vladimir Ustinov spoke on Ekho Moskvy radio. He hinted Yukos could face new tax claims for other years. "You know, this is a kind of snowball. This affair has a beginning, but it's very difficult to see the end," he said. "[With] these huge profits that Yukos had and which we saw in the course of investigation -- they can easily pay these taxes. Like [singer-songwriter Vladimir] Vysotskii [wrote] -- 'Where's the money, Zina?'"

The reports of a possible deal helped send Yukos shares some 11 percent higher in trading today.
The Organization for Economic Cooperation and Development today accused the Russian government of "highly selective law enforcement" against Yukos, and said that the same charges of tax evasion could be brought against "millions of companies and citizens."


But some analysts are skeptical. James Fenkner, head of research at Troika Dialog, a Moscow investment company, said it's "bordering on the naive" to expect a last-minute deal. "What the Kremlin is doing is sending a signal to the other oligarchs [that] the state is in charge, not them," he said. "This is a new environment over the last decade, the state is now stronger than the oligarchs. And in cutting a deal with Khodorkovskii at this point, I believe [President Vladimir] Putin would be sending the wrong signals to the others -- basically that you can still cut a deal and get out of your problems. There is a [possibility that a deal can be reached], but I would argue that it's much lower than the market assumes."

It's just the latest twist in a case that has seen Yukos brought to the edge of bankruptcy, its assets frozen, and Khodorkovskii in custody awaiting trial for fraud and tax evasion.

Khodorkovskii's supporters say the case against him and Yukos is politically motivated, designed to punish him for supporting political opponents of President Vladimir Putin.

There's been criticism from outside Russia, too. The Organization for Economic Cooperation and Development today accused the Russian government of "highly selective law enforcement" against Yukos, and said that the same charges of tax evasion could be brought against "millions of companies and citizens."

U.S. State Department spokesman Richard Boucher also voiced concerns yesterday. "The appearance of a lack of due process and the possible threat to private property rights have put domestic and international business communities somewhat on their guard and have raised serious questions about the Russian government's respect for investment rights and willingness to arrive at equitable solutions to promote business development," Boucher said.

If the deadline passes without a deal, it's unclear what will follow. Yukos's chief financial officer, Bruce Misamore, said that authorities could start seizing assets as soon as tomorrow. He said the company could try to avoid that happening by filing for bankruptcy.

But news agencies also report the authorities could take a more lenient line, giving Yukos up to two months to raise the money.

(RFE/RL's Russian Service contributed to this report.)
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