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Last Updated: Friday, 17 December, 2004, 08:46 GMT
Russia to push on with Yukos sale
People leaving Yukos HQ
Yukos has won the injunction, but the auction looks set to go ahead
Russia has said it will auction off a key production unit of embattled oil company Yukos as planned this weekend despite a US court injunction.

Authorities aim to sell Yuganskneftegas on Sunday, 19 December, to pay Yukos' $27.5bn (14.2bn) tax bill.

On Thursday, a US bankruptcy judge granted a temporary injunction blocking the Yuganskneftegas sale.

But Russian officials said the Houston court had no jurisdiction in the case and called the ploy a "nonsense".

Still on

The Russian Federal Property Fund, charged with selling Yuganskneftegas, "is not a private shop but a specialized state department," fund spokesman Alexsander Komarov told local radio station Ekho Moskvy.

1995-96: Billionaire Mikhail Khodorkovsky buys Yukos
2000: President Putin allegedly gives oligarchs free rein in the business world if they stay out of politics
2003: Mr Khodorkovsky openly funds opposition parties
Jul 2003: Yukos offices are raided amid allegations of tax evasion and fraud
Oct 2003: Mr Khodorkovsky is arrested
Dec 2003: Yukos hit with first $3.5bn tax bill
Jul 2004: Tax bill mounts and bailiffs say they will sell Yukos' main asset
Dec 2004: Yukos board leaves Russia and firm files for bankruptcy

"We are strictly guided by Russian laws, court rulings and the relevant resolutions of court bailiffs. As for Yuganskneftegas shares, a relevant resolution has been passed."

The fund added that it has not received an "order to cancel the auction. Therefore, we are still planning to continue".

Yuganskneftegas is up for auction at a starting price of nearly $9bn, a price Yukos executives say is grossly undervalued.

Analysts believe that the production unit is likely to be bought by a government-backed firm, such as Gazprom, effectively bringing a large chunk of Russia's lucrative oil and gas industry back under state control.

Gazprom is bidding via its subsidiary Gazpromneft and a spokesman for the unit said on Friday that it still planned to take part in the sale.

"Nobody has so far annulled the decision of our main shareholder to participate in the auction," said Gazpromneft's Alexander Stepanenko.

Waste of time?

Yukos sought bankruptcy protection under US Chapter 11 legislation on the grounds that the sale of Yuganskneftegas would seriously affect shareholder value and in the belief that the US judiciary was willing to protect the value of shareholders' investments.

It argued that US bankruptcy law gives worldwide jurisdiction over a debtor company's property.

Bankruptcy Judge Letitia Clark issued a temporary injunction intended to stop Gazprom bidding for Yuganskneftegas.

The injunction was also issued against the banks that are planning to finance the deal.

If the banks adhere to the ruling, which we hope they would, there would be no financing available for the banking syndicate
Mike Lake, Yukos spokesman

In her ruling, Judge Clark wrote that investors in Russia, the US and elsewhere need to know that when they invest in foreign enterprises "they may do so without fear that their investments may be the subject of confiscatory action by agencies of the foreign government".

Lawyers acting for Yukos said they hoped that even if the auction went ahead, Gazprom would not get the finance to follow through on the sale.

"If the banks adhere to the ruling, which we hope they would, there would be no financing available for the banking syndicate," said Mike Lake, a spokesman for the firm representing Yukos.

Many commentators believe the Russian government's aggressive pursuit of Yukos is a politically-motivated response to the political ambitions of its former chief executive, Mikhail Khodorkovsky.

Mr Khodorkovsky, who had funded liberal opposition groups, was arrested in October last year on fraud and tax evasion charges and is still in jail.

Why the oilfields will be auctioned off

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