#11 - JRL 8377 - JRL Home
RIA Novosti
September 21, 2004
YUKOS HITS BACK

MOSCOW, September 20 (Nina Kulikova, RIA Novosti economic analyst) - Federal authorities' confrontation with the Yukos oil giant has come to an edge as the opponents are inventing ever new ways to pressure each other.

Out to grab Yuganskneftegaz, the Yukos' principal oil-extracting affiliate, the federal top is recurring to the criminal law, and fiscal agencies and the Ministry of Natural Resources have come out with exorbitant financial claims to the mother company.

In a session of September 17, the Moscow Arbitration Court dismissed a Yukos appeal against bailiffs' arrest of 24 Yukos branches' stock. The Ministry of Natural Resources, in its turn, is threatening to quash the Yuganskneftegaz oil-drilling license after Yuganskneftegaz back taxes leapt over a 3.5 billion ruble mark, roughly $100 million, and fiscal claims are snowballing. Proceeding from acting contracts, ministerial experts think there is every reason to revoke the license.

Yuganskneftegaz owes 50 million rubles for electricity, the Siberian-based Tyumenenergo power industrial company announced last week, so the company may stay without electricity.

Yukos managers are not sitting on the fence but offer pointed resistance. Driven into a corner, the mammoth has made several spectacular moves in self-defense.

The company has secured minority holders' support, and repeatedly appealed to Western investors for a way out of its fiscal deadlock. Though Yukos is barely surviving on the brink of bankruptcy, it is making progress and hopes to comply with obligations, Bruce Misamore, its finance manager, reassured an on-line news conference of September 17. The company can eventually pay its debts if they are rescheduled. Partners are standing by Yukos, and clients have paid it in advance so that the stranded giant afford petroleum export transportation next month, he added.

The federal top is working to underrate Yuganskneftegaz pricing. Yukos has hit back. Its press releaseof the eventful September 17 proceeded from geological prospecting of the Ob oilfield and the oil-rich Achimovo horizon to send Yukos high up at the stock exchange. The latest estimate specifies the Yuganskneftegaz workable deposits at 12.8 billion tons, or 93.7 billion barrels, to exceed a 3P-total of explored, prospected and extrapolated reserves-for last year's end by 10.1 billion tons. The previous estimate amounted to a mere 2.7 billion tons, or 19.4 billion barrels. If auditors find the new estimates convincing, the Dresdner Kleinwort Wasserstein bank, which is pricing Yuganskneftegaz for auction, will certainly send its price high up.

Yukos evidently views the Yuganskneftegaz unlicensing prospects as a disaster, and acts accordingly-suffice it to mention the giant's latest move. It has determined to cut petroleum deliveries to China by rail, starting September 28, as the full scope is unaffordable with Yukos accounts arrested by fiscal agencies, say company bosses. The company is suspending exports to the CNPC-Chinese National Petroleum Corporation, to which it was to offer close on a million tons of crude oil before the year's end on acting contracts. Now, Yukos can no longer afford export duties and railway fares, explains its Directors' Board.

The news did not turn the stock market upside down but came as an alarming political sensation. Yukos is currently Russia's only sizeable petroleum exporter to China, and it is hard to find a substitute. The impending export stoppage is not a mere failure on a private contract-it is an ultimatum to the federal top, and it plays on Russia's international interests, considering an intergovernmental agreement on which Russian petroleum exports to China base.

As the company reassures, it hopes to resume deliveries to the CNPC as soon as possible. Yukos also hopes the federal government is aware of vital importance of Russian oil exports, and so will work for smooth supplies to China.

Importantly, WenJiabao, China's State Council Premier, is starting a visit to Russia, September 24. Energy partnership will be prominent on its agenda. China has been waiting several years for Russia to determine whether it will eventually lay a petroleum mainline eastward, and steady petroleum supplies are essential for that country. Liu Quchang, Chinese Ambassador to Russia, expressed his assurance, last week, that Russia would cope with blueprinted exports. Russian functionaries, in their turn, said, late in August, that they expected no problems at all. During Mr. Wen's visit, the two countries expect to sign agreements on boosted Russian oil exports to China, and final understandings on Russia's prospects to join the World Trade Organization.

The Yukos export suspension appears in that context a far-reaching move to bring pressure on the federal top in the suspense-laden confrontation over taxes.

Analysts view the developments as an extremely risky positional game. The situation offers the Russian government two ways out. It may make concessions to Yukos to ensure its smooth performance and so prevent Chinese-Russian tensions. That option is hardly probable, considering either side's tough stances ever since the Yukos controversy started. The other way is to unlicense Yuganskneftegas, whatever bitter response the business community may offer.

One thing is clear now-the government is anxious to pocket Yukos possessions in a legal way. We shall see quite soon what it will do.