Russia was set to rip the heart out of its biggest oil producer YUKOS today, grabbing the firm's core unit in a forced auction after almost a decade in private hands.
The sale of Yuganskneftegaz, which pumps more oil than OPEC member Qatar, was due to start this afternoon in defiance of a US legal order and in pursuit of tax claims which has left YUKOS with a back-tax bill of $27.5 billion.
Leading prospective buyer Gazprom was expected to go ahead and bid despite a further US bankruptcy court ruling that has directed the state-controlled gas monopoly, and its foreign financial backers not to take part in Sunday's auction.
The US bankruptcy court's initial order on Thursday to temporarily block the sale, in response to YUKOS filing for Chapter 11 bankruptcy protection, was upheld in a second ruling yesterday.
And only hours before the auction, lawyers for Menatep, a group through which Khodorkovsky and his associates control YUKOS, pledged to extend the fight to other countries. The lawyers told a news conference in Moscow they would retaliate by trying to seek injunctions in foreign courts impounding Russian oil and gas exports.
YUKOS is widely seen by analysts as the victim of a Kremlin campaign to crush its politically ambitious owner, Mr Mikhail Khodorkovsky, and seize control of strategic sectors of the economy sold off in the chaotic privatisations of the 1990s. Mr Khodorkovsky is now on trial for fraud and tax evasion and faces 10 years in jail if convicted.
And the minimum auction price of $8.65 billion for Yugansk leaves his company vulnerable to the Russian authorities requiring further asset sales to meet its full tax bill.
The assault on YUKOS has also shaken investment confidence in Russia, where the economy is showing signs of slowing down despite sky-high oil prices. Russia is the world's second biggest crude oil exporter.