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Last Updated: Friday, 25 February 2005, 15:31 GMT
Yukos loses US bankruptcy battle
Yukos HQ
Yukos faces a huge Russian tax bill
A judge has dismissed an attempt by Russian oil giant Yukos to gain bankruptcy protection in the US.

Yukos filed for Chapter 11 protection in Houston in an unsuccessful attempt to halt the auction of its Yugansk division by the Russian authorities.

The court ruling is a blow to efforts to get damages for the sale of Yugansk, which Yukos claims was illegally sold.

Separately, former Yukos boss Mikhail Khodorkovsky began testimony on Friday in his trial for fraud and tax evasion.

Giving evidence

Mr Khodorkovsky - who has been in jail for more than a year - pleaded not guilty to the charges brought against him and denied involvement in any criminal activities.

"I do not consider myself guilty of a single charge that has been brought against me," he told a Moscow court.

I always acted within the law
Mikhail Khodorkovsky, former Yukos boss

Giving evidence for the first time, Mr Khodorkovsky said allegations that he had fraudulently acquired a 20% stake in fertiliser firm Apatit at the time of its 1994 privatisation were false.

"I categorically object to the way that the running of a normal business has been presented as a work of criminal fiction," he said.

"I always acted within the law."

Jurisdiction row

Texas Judge Letitia Clark had earlier ruled that Yukos did not have enough of a US presence to establish US jurisdiction.

"The vast majority of the business and financial activities of Yukos continue to occur in Russia," Judge Clark said in her ruling.

"Such activities require the continued participation of the Russian government."

Yukos sought a US court order to help prevent the sale of Yugansk, auctioned help pay off $27.5bn (14.5bn) in unpaid taxes.

The business was bought for $9.4bn by a previously-unknown group, which was in turn bought up almost immediately by state-controlled oil company Rosneft.

We believe the merits of our case are strong and simple
Steven Theede, Yukos chief executive

Yukos had argued that a US court was entitled to declare it bankrupt before its Yugansk unit was sold, since it has local bank accounts and its chief finance officer Bruce Misamore lives in Houston.

Yukos claimed it sought help in the US because other forums - Russian courts and the European Court of Human Rights - were either unfriendly or offered less protection.

Russia had indicated it would in any case not abide by the rulings of the US courts.

Mikhail  Khodorkovsky in prison
If convicted, Mikhail Khodorkovsky faces a long jail term

In her ruling, the judge acknowledged that "it appears likely that agencies of the Russian government have acted in a manner that would be considered confiscatory under United States law".

But she said her role was simply to decide on jurisdiction.

The US court's jurisdiction had been challenged by Deutsche Bank and Gazpromneft, a former unit of Russian gas monopoly Gazprom which is due to merge with Rosneft.

Analysts said the ability of Gazprom and Rosneft to trade freely overseas had been stifled while the ownership of Yugansk remained unclear.

More options

Yukos said it would consider its options in light of the ruling.

However, it claimed that the court had backed its argument in four out of five key issues.

"We believe the merits of our case are strong and simple," said chief executive Steven Theede.

"Our assets were illegally seized. We want them back or damages paid."

What the decision means for the troubled oil giant

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