Kremlin ups stakes in Yukos row

Yukos has much to fear from a tax audit

Russian prosecutors have asked the tax authorities to comb through the books of Yukos, the giant oil firm which is currently in conflict with the Kremlin.

A tax audit could have severe consequences for Yukos, which is suspected by the Russian Government of embezzlement.

The news represents an escalation of the tension between the two sides, after police raids of Yukos's head office and the interrogation of Mikhail Khodorkovsky, its chairman.

Yukos, previously close to President Vladimir Putin, has defended itself, accusing the government of provoking a "crisis in society".

Mr Khodorkovsky, arriving back in Russia after an international summit, said he would continue to work as normal.

"Investors have reacted nervously but we have kept the situation under control."

'Motivated by fear'

Yukos is already facing a series of criminal investigations; Platon Lebedev, one of its main shareholders, has been charged with defrauding the state in a 1994 privatisation deal.

An audit is an especially terrifying threat in Russia, where the tax authorities are noted for their uncompromising attitude and harsh methods.

Yukos's supporters are concerned that an audit can be twisted to produce any result the authorities wish, since Russian tax law is many-layered and complex.

In response to the campaign against it, Yukos has published an open letter signed by some of Russia's foremost liberals, including politician Vladimir Ryzhkov and economist Yevgeny Yasin.

"Such unambiguous actions are designed to force people to continue to support the party in power during the coming elections, simply because they are motivated by fear for their life in the future and the future of their businesses," they wrote.

Declaration of war

The Yukos dispute is the latest in a clashes between big business and the Kremlin since the collapse of communism in 1991.

Since Mr Putin came to power in 1999, influential tycoons such as Mr Khodorkovsky have been less prominent in public life, and generally more settled in their dealings.

Yukos has prospered - and Mr Khodorkovsky became the richest man in Russia - in part because it did little to oppose the government.

The recent souring of relations is something of a mystery, but some say it originates from Mr Khodorkovsky's increasing allegiance towards the liberal movement, which opposes Mr Putin's authoritarian style.

Although Yukos is a large and generally successful company, some mighty Russian businesses have been brought down after antagonising the Kremlin.