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Russia: Yukos Uncertainty Follows Tax Judgment

The Yukos building 2 July 2004 (RFE/RL) -- Russian tax officials have demanded that Russian oil company Yukos pay some $6.8 billion in back taxes in a move that has left the future of the oil giant in serious doubt.

Tax authorities today ordered Yukos to pay $3.4 billion in back taxes for the year 2000 and gave it five days to fulfill the order. Later, they ordered the company to pay roughly an additional $3.4 billion in back taxes dating from 2001.

Yukos spokesman Aleksandr Shadrin confirmed the five-day deadline for paying the 2000 taxes: "The [officials] delivered a warrant dated 30 June on the execution of the court's ruling. This warrant says, in particular, that to ensure that the court's decision of 26 May is executed and comes into legal force, it is prescribed that the company comply voluntarily with this decision within five days."

Yukos's bank assets in Russia have now been frozen. Reports say the government will use the money to pay the taxes if Yukos cannot meet the 5 July deadline.

Yukos, once considered the most profitable company in Russia, claims it does not have the money to pay the taxes. Reports say the company has just $1 billion in its accounts.

The value of Yukos shares traded on the Moscow stock exchange has plunged on the news, falling around 20 percent in the past two days. Traders say the company may have to sell off its core assets to pay the bill and may not survive in its present form.

The tax move marks only the latest development in the Yukos affair, which began in 2003 with the arrest of company founder Mikhail Khodorkovskii and another leading executive.

The government accuses Yukos of evading taxes -- a charge the company denies.

Khodorkovskii, still in jail but possessing a personal fortune estimated at $15 billion, faces a 10-year sentence if convicted on separate fraud and tax-evasion charges. These date from Russia's controversial privatization drive in the 1990s that put billions of dollars into the hands of businessmen like Khodorkovskii.

Russian President Vladimir Putin has said he does not want to destroy the company, but rather to protect the rights of ordinary citizens who failed to gain from the sale of state assets.

Observers say, however, Putin is trying to rein in a potentially powerful rival in Khodorkovskii by depriving him of an enormous asset like Yukos.

The affair has cast a shadow on Putin's claims to make Russia more attractive to outside investors. Yukos's stock price has fallen by half since 2003, as investors reject what they see as undue political influence in the economy.

Reports say the company does have options at its disposal to avoid bankruptcy. One would be to give up its 35-percent stake in the Sibneft energy company -- a former partner and now a rival. The market value of that stake is currently around $4.7 billion.

"It has been stated by the company's lawyers that at the moment [Yukos] has the details of its bank balance and documents confirming Yukos's 35-percent stake in Sibneft," Shadrin said.

He said Yukos has already presented the Sibneft offer to the government, but so far has heard no reply.

Another possibility is that Yukos could pay a reduced amount of back taxes that would be divided over a couple of years. Like the Sibneft proposal, this idea has yet to elicit a response from the government.

(RFE/RL with agency reports)
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    Mark Baker

    Mark Baker is a freelance journalist and travel writer based in Prague. He has written guidebooks and articles for Lonely Planet, Frommer’s, and Fodor’s, and his articles have also appeared in National Geographic Traveler and The Wall Street Journal, among other publications.

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