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Last Updated: Tuesday, 1 August 2006, 20:10 GMT 21:10 UK
Yukos declared bankrupt by court
Judge Pavel Markov delivers his decision on Yukos
Judge Markov's decision is expected to lead to the break-up of Yukos
Troubled Russian oil firm Yukos has been declared bankrupt by a court in Moscow, clearing the way for the firm to be liquidated.

The decision ends a three-year court battle for survival, after Yukos was hit with a huge back tax bill.

The saga has seen former Yukos chief Mikhail Khodorkovsky jailed and parts of the oil firm's empire sold off.

"It's the death sentence for the company," Yukos lawyer Drew Holliner said after the ruling.

Yukos's core shareholder GML condemned the move, saying the decision to sell of its assets would "likely leave shareholders out of pocket".

The group has vowed to fight the decision in Europe, the US and elsewhere.

Arbitration Court judge Pavel Markov's decision came as "little surprise", Mr Holliner said, given that Russian tax authorities and state-owned oil firm Rosneft are the group's biggest creditors.

The court ruling backs a vote by shareholders which had rejected Yukos's assurances that it could remain in business and pay the $17bn (9bn) it owes to creditors.

Race for assets

One issue yet to be decided is that of which companies will gain control of the company's remaining assets through liquidation.

Yukos's bankruptcy supervisor, Eduard Rebgun, has been named as the firm's liquidator. He will now ask auditors to assess the value of its assets which will be sold at an open auction.

Analysts believe state-controlled oil company Rosneft - which gained Yukos' Yuganskneftegaz unit after a controversial auction in 2004 - or national gas monopoly Gazprom stand to benefit most from any sale.

Rosneft is already Yukos' second-biggest creditor behind the federal tax service.

Gazprom, meanwhile, has said it is interested in acquiring a number of Yukos' assets, including its Tomskneft production subsidiary.

Tax bill

Yukos has struggled to survive after a series of tax demands totalling $27bn.

It says the demands are linked to a political campaign against its founder, Mikhail Khodorkovsky, who is currently serving a long prison sentence in Siberia.

"The attack on Yukos, culminating in these bankruptcy proceedings, has been based on a political agenda. The Russian Government has set out to destroy Yukos from the very beginning," GML director Tim Osborne said.

In 2004, the back tax bill led to Yukos' main Yuganskneftegaz subsidiary being expropriated by the government and sold off at auction - to be ultimately acquired by Rosneft.

The sale led to a legal challenge from Yukos when Rosneft floated on the London Stock Exchange.

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