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Last Updated: Monday, 11 October, 2004, 16:34 GMT 17:34 UK
Yukos suffers further tax setback
Yukos oil rig in Siberia
Record oil prices make Russia's oil industry very profitable
Russian oil and gas company Yukos has suffered another setback in its battle to avoid paying billions of dollars in back taxes and avoid bankruptcy.

The Moscow court of arbitration ruled that Yukos must pay fines of $1.4bn (778m) stemming from its failure to pay a back-tax bill for 2001.

The company has been ordered to pay a total of almost $8bn to settle claims dating back to 2000 and 2001.

Yukos says the charges are politically motivated and is expected to appeal.

Battle lines

The spat between President Vladimir Putin's administration and Yukos, Russia's biggest oil producer, has been closely watched by investors both at home and abroad.

It has dented the country's main stock index, threatened to disrupt world oil supplies and raised question marks over the freedom of speech and political expression in Russia.

The crackdown on Yukos began in October last year with the arrest of its former chief executive, Mikhail Khodorkovsky, who is currently facing charges of fraud and tax evasion.

Many analysts have said that that his trial is politically-motivated and stems from Mr Khodorkovsky's growing political activity and support of parties opposed to Mr Putin.

Yukos has said that it is unable to meet the government's demands, warning that it will go bankrupt if it is forced to pay the bills.

The authorities, meanwhile, have frozen the company's bank accounts, all but requiring it to sell off some of its assets to pay its taxes.

Bailiffs have been trying to take control Yukos' key Siberian unit, Yugansk, with an eye to selling it off.

Last week, Yugansk received a separate tax demand for some $950m.

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