The Russian government will break up the main production unit of embattled energy giant Yukos and put part of it up for sale to cover tax arrears, the Justice Ministry said yesterday, increasing the threat of bankruptcy to the country's biggest oil firm.
The ministry said it had run out of patience with Yukos's slow repayment of its tax bill of around $8.5 billion (€6.9 billion), and would recoup the cash by selling a stake in or some assets belonging to Yuganskneftegaz, which accounts for 60 per cent of Yukos's output.
Analysts were shocked by the low valuation placed on Yuganskneftegaz by German investment bank Dresdner Kleinwort Wasserstein, which had been expected to give it a price tag of $15-$18 billion.
The figure quoted yesterday by the Russian government was only $10.4 billion, which brings the cost of some of its assets within range of Kremlin-friendly Russian firms.
"Since the valuation of Yugansk has been completed but the paying off of the (tax) debts is dragging on without justification, a decisionhas been taken to sell part of the property of Yukos," the Justice Ministry said in a statement.
Yukos, which disputes the bill and wants the courts to allow it to sell its own assets or stock to cover the debt, was indignant as its shares fell more than 10 per cent.
"Right now, our experts are trying to translate the Justice Ministry statement into simple Russian, because we cannot make sense of the text issued by the esteemed ministry," said Yukos spokesman Mr Alexander Shadrin.
Banking sources said Dresdner Kleinwort Wasserstein had valued Yugansk's equity value at between $15.7 billion and $18.3 billion, as analysts expected, but also considered a worst-possible-scenario valuation of $10.4 billion, which took into account a lingering government threat to revoke the Yukos unit's drilling licenses.
"This is very bad news for Yukos as it shows that the government is determined to separate Yugansk from Yukos," said Mr Oleg Maximov of the Troika Dialog brokerage. Yukos came under attack after its founder, Mr Mikhail Khodorkovsky, was arrested last October on charges of tax evasion and fraud, in a case widely seen as a politically motivated attack on the most powerful Russian critic of president Vladimir Putin.
Some observers say officials had to act quickly to seize Yuganskneftegaz because high world crude prices were actually allowing Yukos to pay its tax bill more quickly than expected.
It has already almost covered the $3.4 billion claim for the year 2000.
