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Last Updated: Thursday, 23 December 2004, 07:10 GMT
State firm 'gains' key Yukos unit
Yugansk, Yukos' main oil production unit
Analysts are predicting that Yukos is unlikely to survive intact
Russia's state-owned oil firm Rosneft has waded into the midst of the battle that has been raging for control over many of the country's key oil assets.

Rosneft said it has bought 100% of Baikal Finance Group in a move that would give Russia a tighter grip over its booming oil industry.

Baikal was the surprise buyer of oil and gas giant Yukos's main production division at a forced auction on Sunday.

Rosneft would now control an extra 11% of Russia's total crude oil output.

A spokesman for the company said that the acquisition is part of its plan to build a "balanced, national energy corporation."

Complex web

The latest announcement comes after more than a year of wrangling that has pushed Yukos, one of Russia's biggest companies to the brink of collapse.

The Russian government put Yukos's Yuganskneftegas subsidiary up for sale last week after hitting the company with a $27bn (14bn) bill for back taxes and fines.

You cannot sue the Russian government
Eric Kraus, Sovlink Securities

Analysts say that Yukos's legal attempts to block the auction by filing for bankruptcy protection in the US are probably what caused this week's cloak-and-dagger dealings.

Gazprom, the company originally tipped to buy Yuganskneftegas, was banned from taking part in the auction by a US court injunction.

By selling the Yukos unit to little-known Baikal and then to Rosneft, Russia is able to circumvent a host of tricky legal landmines, analysts said.

"You cannot sue the Russian government," said Eric Kraus, a strategist at Moscow's Sovlink Securities. "The Russian government has sovereign immunity."

"The government is renationalising Yuganskneftegas."

Far from over

Even so, analysts reckon that the saga still has a long way to go.

The Rosneft announcement came just hours after Yukos accused Gazprom of illegally taking part in Sunday's auction. It has said it will be seeking damages of $20bn.

The claim was made at the latest hearing in the US bankruptcy court in Houston, Texas, where Yukos, had filed for Chapter 11 bankruptcy protection.

If found in contempt of the US court order blocking the auction, Gazprom could face having foreign assets seized.

Yukos' lawyers had also been expected to try to have Baikal's assets frozen.

Lawyers claimed the auction was illegal because Yukos - with an office in Houston - had filed for bankruptcy and therefore its assets were under the protection of US law which has worldwide jurisdiction.

Further muddying the waters is a merger between Rosneft and Gazprom which authorities have said will go ahead as planned.

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