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Last Updated: Friday, 19 November, 2004, 17:31 GMT
Khodorkovsky lambasts Yukos sale
Mikhail Khodorkovsky
Mikhail Khodorkovsky is facing charges of fraud and tax evasion
Mikhail Khodorkovsky, the former boss of Yukos, has spoken out against government plans to sell the oil giant's main unit Yugansk.

The government is to begin selling the crucial production unit, seized by the authorities in order to pay Yukos' huge tax bills, on 19 December.

Mr Khodorkovsky, who is currently in jail, said the sale was the "worst solution" to the problems facing Yukos.

The tycoon also criticised the recent arrest of several Yukos officials.

Shareholder role

Yugansk is to be sold for a minimum of 246.8bn roubles ($8.65bn; 4.7bn), well below the $20bn which Yukos says the unit is worth.

By their actions, the authorities are damaging not only the company but also the state
Mikhail Khodorkovsky
Mr Khodorkovsky, who is still a major shareholder in Yukos, said the firm's investors and not the state should decide the company's future.

"By their actions, the authorities are damaging not only the company but also the state, minority shareholders and society as a whole," he said in a statement.

Mr Khodorkovsky claimed that the arrest of key Yukos officials in recent days meant its oil production facilities were now effectively controlled by the government.

"Authorities are consistently and demonstratively pulling Yukos managers out of the process by bringing absurd charges and claims against them," he said.

President Putin is widely believed to have targeted Mr Khodorkovsky, Yukos' founder and former chief executive, after he used his fortune to fund opposition groups.

Mr Khodorkovsky was arrested in October 2003 when masked and armed members of the security police force FSB stormed his private jet at an airport in Siberia.

Petrol station
Yukos' troubles are mounting

He has been detained ever since. His trial over fraud and tax evasion charges began on 16 June.

Legal move?

Confirmation of Yugansk's sale came at the same time as Russian authorities demanded Yukos pay an extra $5.9bn in unpaid tax revenues.

This additional figure is for 2003 and comes on top of the $18.5bn the Kremlin is seeking for 2000-2002, of which Yukos has paid about $4bn so far.

The company's president, Steven Theede, called the proposed sale of Yugansk "a government-organised theft to settle a political score".

The firm has argued that Russian law forbids the authorities from selling Yuganskneftegaz - the unit's full name - which pumps 60% of Yukos' oil output.

"The sale is clearly illegal under Russian law, which states that non-core assets are to be disposed of first in tax settlement cases."

Buyers and sellers

With most of Yukos' bank accounts frozen, it says it is being prevented from settling the tax demands.

Russian President Vladimir Putin
Is Putin pushing to put Yukos out of business?

Instead, the government wants the money to come from the sale of Yugansk.

The rules laid down on Friday morning demand a returnable deposit of $1.73bn from bidders.

The rules lay down no limits on foreign bidders - but observers said there was little prospect of a realistic bid from abroad.

"The idea that a foreign oil company will buy Yugansk is a joke," said Martin Taylor, hedge fund manager at Thames River Capital in London.

"Due diligence alone would take three months."

Others speculated that lawsuits could yet come in from shareholders - and pointed out that the company's final tax bill was completely impossible to estimate.

State sale?

Yukos has frequently said its expects Yugansk will end up in the hands of a state-owned firm, effectively renationalising it, or to a supporter of President Vladimir Putin - either way, at a knock-down price.

For months, the likely valuation has been the subject of rumour.

At one point, Yukos said the government might try to sell it for as little as $4bn, while the government's own advisors set a minimum of $10.4bn but said that would be "overly conservative".

"The game starts now," said Chris Weafer, chief strategist at Moscow's Alfa Bank. "Its going to come to an end one way or the other."

But he added: "Why have an independent evaluator if you ignore what they say?"




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