msnbc.com news services
updated 12/17/2004 4:35:21 PM ET 2004-12-17T21:35:21

Russia said on Friday it would go ahead with an auction to sell the key asset of embattled oil company Yukos despite a U.S. bankruptcy court decision to block it for several days.

“We are selling Yugansk by order of a bailiff and so far we haven’t received any order to cancel the auction (on Sunday). Therefore, we are still planning to continue,” a spokesman for the Federal Property Fund said.

Meanwhie, a Western bank consortium led by Deutsche Bank has frozen a planned credit line to Russia’s state-controlled gas monopoly Gazprom following the court injunction, the ITAR-Tass news agency reported Friday. Gazprom was seen bidding for the Yukos unit.

Citing unidentified, high-ranking Western financial sources, ITAR-Tass said the group had decided to freeze the deal at least until the Houston court reaches a final verdict. The credit line is thought to be worth $10 billion.

The banks involved are Deutsche Bank, ABN Amro, BNP Paribas, Calyon, Dresdner Kleinwort Wasserstein and J.P. Morgan. Gazprom must have a signed loan agreement to place the bid, bankers have told Reuters.

The source said the move was necessary, “because in case a credit line is given to Gazprom over the next 10 days, Western banks would risk falling under legal prosecution in the United States,” ITAR-Tass reported.

Russia has said the U.S. court, where Yukos made a surprise bankruptcy protection filing on Tuesday, has no jurisdiction over the sale.

The government has ordered the auction of Yuganskneftegaz, Yukos's main production unit, to repay some of the $27.8 billion it says Yukos owes in back taxes.

Gazprom, expected to win the auction whose starting price is $8.5 billion, said it would participate despite the U.S. court decision to block it for 10 days.

“Nobody has so far annulled the decision of our main shareholder (Gazprom) to participate in the auction,” Alexander Stepanenko, a spokesman for Gazprom’s oil subsidiary Gazpromneft, which will participate in the sale, said.

The U.S. court in Houston said the ruling applied to Gazprom and the syndicate of Western banks that was to finance the purchase.

The Russian government’s targeting of Yukos and its owners has been seen as a Kremlin-driven effort to seek retribution for former CEO Mikhail Khodorkovsky’s funding of opposition parties and complaints of government corruption. Russian President Vladimir Putin has characterized the effort as a crackdown on corruption and dubious accounting.

Khodorkovsky is being tried for fraud and tax evasion, and has been jailed for 14 months.

Khodorkovsky said Thursday that while the bankruptcy filing was “distressing,” he couldn’t blame the company’s managers.

“They have done more than could have been expected of them to save the company and are now trying to protect their personal reputation. Not that this will help the company’s shareholders,” he said in a statement posted on his press center’s Web site.

Yukos, citing the opening bid price set by the government, had argued the sale of Yuganskneftegaz would destroy shareholder value.

Appraisal reports prepared by Dresdner Kleinwort Wasserstein and J.P. Morgan had put the value of Yuganskneftegaz between $18 billion and $25 billion.

Reuters and The Associated Press contributed to this report.

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