Yukos May Start to Shut Down Oil Production Next Week (Update4)
July 2 (Bloomberg) -- OAO Yukos Oil Co., Russia's biggest oil exporter, said production may stop at some fields as early as next week after its bank accounts were frozen because of a 99.4 billion-ruble ($3.4 billion) tax claim.
Halting production would slow delivery of Russian oil to a world market where prices have soared 28 percent in a year, to $35.90 a barrel in London. Yukos planned to pump 1.8 million barrels a day this year, about equal to Iraqi exports from the Persian Gulf. Yukos shares fell 18 percent in Moscow today.
While the government ``may have the legal right to do this, the commercial consequences of what they're trying to do will be severe -- the loss of billions of dollars of foreign exchange revenue for the Russian economy and a driving up of the oil price,'' said Pieter Bruinstroop, who helps manage $2.3 billion of stocks at APS Asset Management Ltd. in Singapore.
Freezing its accounts ``may stop the company operations,'' Viktor Gerashchenko, the chairman of Yukos, told reporters in Moscow. ``The accounts, which are under arrest and which are constantly receiving revenue from oil sales, are used for payments, including to customs before oil is pumped through the pipelines.''
Response Awaited
The fate of Yukos, born out of state asset sales that made Mikhail Khodorkovsky into Russia's richest man, hinges on the government's response to a Yukos request to spread the tax bill out over time because it can't meet the demand in full now.
President Vladimir Putin said June 17 he opposes bankrupting Yukos. He and Prime Minister Mikhail Fradkov met yesterday with 19 businessmen, including Russia's third-richest man, Viktor Vekselberg, fifth-richest, Vladimir Potanin, and sixth-richest, Mikhail Fridman, to discuss government's relations with business.
The accounts of Yukos's production and trading subsidiaries aren't frozen, Bruce Misamore, the company's chief financial officer, told reporters. The Moscow-based parent company acts as the principal agent for its transactions, he said.
``The government is driving us into the bankruptcy,'' Misamore said. ``It's entirely political: financially, we just had our best month ever.''
Crude oil prices rose to a record last month on concern supplies from the Middle East would be disrupted.
Clamping Down
Yukos shares fell as much as 37.41 rubles and were down 15.84 rubles at 194.57 rubles as of 4:03 p.m. in Moscow. They reached 163.55 on June 16, the lowest since January 2002.
Putin's government is targeting Yukos and Khodorkovsky, 41, as part of a clampdown on billionaires who built their wealth under the previous president, Boris Yeltsin. The attack has raised concerns about protection of property rights in Russia.
Court bailiffs who visited Yukos yesterday gave it five working days to pay the tax claim ``voluntarily, before they arrest cash at the accounts,'' Yukos spokesman Alexander Shadrin said. The deadline may expire on July 6, the company said.
Management is concerned the freeze on bank accounts may lead the company to miss its goal of boosting output 11 percent this year. Yukos, which produces about a fifth of Russia's output, said in February it planned to produce 1.8 million barrels a day this year. First-quarter exports were 1.1 million barrels a day, 64 percent of Yukos's production.
New Claim
Interfax news agency yesterday cited an unidentified tax official as saying Yukos may face another 98 billion-ruble bill for obligations not paid in 2001. Moscow-based Yukos hasn't got any new claims from the Tax Ministry, Gerashchenko said.
``It appears the government wants to shut this company down and potentially take other assets away,'' said Tim McCarthy, who manages about $500 million in Russian assets, including Yukos shares, at Moscow-based Troika Dialog Asset Management.
Gerashchenko sought talks yesterday with the Kremlin, Fradkov, Finance Minister Alexei Kudrin and Dmitry Medvedev, the head of Putin's administration.
``They didn't call back,'' Gerashchenko said. ``They were busy.''
The government and Yukos are negotiating the ways to avoid bankrupting the company, Kommersant newspapers reported, without citing anybody.
In April, Yukos said it may default on $2.6 billion in loans after creditors, including Societe Generale SA, Citigroup Inc. and Group Menatep, said they might seize some revenue to cover interest payments.
Finance minister Kudrin has told creditors that Yukos won't be bankrupted, Gerashchenko said. ``I have no idea how he (Kudrin) will manage the situation, when in fact, the work of the company may be halted,'' he added.
No Bail
Yukos's former chief executive, Khodorkovsky, is the biggest shareholder in Menatep, which owns 44 percent of Yukos. He is being held on charges of fraud and tax evasion without bail at Matrosskaya Tishina prison in Moscow. He denies the charges as politically motivated.
At the meeting with Putin and Fradkov, the Yukos issue wasn't raised, said Alexei Mordashov, Russia's ninth-richest man, who controls steelmaker Severstal Group.
Tax claims against Yukos ``weren't discussed because this issue isn't of systemic character,'' Mordashov said yesterday. ``Putin didn't mention Yukos. He talked about the social responsibility of Russia's businessmen.''
Bailiffs yesterday declined to accept Yukos's 35 percent stake in OAO Sibneft, worth $4.2 billion, as payment for its debt, Gerashchenko said, a decision he called ``stupidity.''
Beilin in a statement yesterday urged the government to take a ``serious and responsible approach to the timescale of the demand'' regarding the 2000 obligation after a five-day period for voluntary payment lapses.
On June 29 Yukos lost a court case with the Tax Ministry and must pay the claim as back taxes and fines from 2000. The company is considering whether to appeal to the highest Russian court, though such a move wouldn't delay enforcement of the decision.
Khodorkovsky's trial has been postponed until July 12. If convicted, the billionaire faces as long as 10 years in jail. |
