Minister says Yukos could owe more taxes

/ Source: The Associated Press

The oil giant Yukos, already on the brink of insolvency, could face two more crippling tax bills, Russia’s Prosecutor General Vladimir Ustinov said Tuesday. The company warned that the government could begin seizing its assets this week.

Yukos has until the end of the business day Wednesday to pay its $3.4 billion tax bill from 2000, but it is prohibited from selling assets to raise cash to pay.

On Monday, the Tax Agency delivered another back taxes bill claiming Yukos owes $3.3 billion for 2001. Ustinov told Ekho Moskvy radio on Tuesday that more back tax claims were likely for 2002 and 2003.

Yukos chief financial officer Bruce Misamore warned Tuesday that court action to seize the company’s assets could begin this week, the Dow Jones Newswires reported.

Misamore said the company had no plans to cut production. But how Yukos, with 105,000 employees, would function if assets are seized was unclear.

Yukos has been beleaguered for more than a year by a complex probe that many analysts see as directed by the Kremlin. Former CEO Mikhail Khodorkovsky has been jailed since October and he and a key associate face charges of fraud and tax evasion.

“This affair has a beginning, but it is very difficult to see the end,” Ustinov told Ekho Moskvy radio.

The prosecutor-general’s comments cooled a sharp rally that Yukos shares enjoyed earlier Tuesday after another senior government official said the Finance Ministry could theoretically restructure the tax bill already facing the company.

Yukos shares climbed 22 percent after those comments but later pared their gains in late trading to about 7 percent from Monday’s close.

$1 billion loan
A group of Western lenders, led by Societe Generale, issued notification Monday that they could call in a $1 billion loan to Yukos. Yukos CFO Misamore, who met with bank officials Tuesday, said they reiterated that they had no plans to immediately call in the loans, the Interfax news agency reported.

But the company is still in a bind. Misamore said that Yukos has only about $1.3-1.4 billion in cash on hand. On Monday, Misamore had warned that the government was driving Russia’s largest oil producer to the brink of bankruptcy.

The Kremlin has claimed repeatedly that the actions against Yukos and Khodorkovsky are part of a broader drive against economic crime and corruption.

But observers see the company’s woes as being the direct result of Khodorkovsky’s alleged political aspirations and his funding of opposition parties ahead of last December’s parliament elections.

President Vladimir Putin said last month that the government isn’t interested in seeing Yukos driven into bankruptcy. But analysts have speculated that the company’s only chance for survival is if Khodorkovsky and business associate Platon Lebedev — who like Khodorkovsky is jailed on charges of fraud and tax evasion — and other key shareholders relinquish their shares.

Ustinov said he believes Yukos’ shareholders are in a position to pay off the tax debts, given the large amounts they have received as dividends.

“Where are the dividends received by shareholders of the company? They are enormous — many billions,” he said. Yukos “could freely pay these taxes. All the indications suggest that the company had enormous profits. Why don’t they pay?”

Staggered payments
Earlier Tuesday, Deputy Finance Minister Shatalov had said that the Finance Ministry could stagger Yukos’ payments, but he said that would have to be done by August before a new law comes into force “under which the repayment in installments can be decided exclusively by the tax authorities,” the ITAR-Tass news agency reported.

However, he also said he had no knowledge of talks on such an arrangement taking place.

Ustinov’s later comments appeared to indicate the government wasn’t in the mood to compromise.

“Everyone says ’poor Yukos,’ but why does nobody discuss the fact that such huge amounts of money were taken away from schools, hospitals and other social problems,” he said.

With a daily output of about 1.72 million barrels, or nearly one in every five that Russia extracts, Yukos is one of Russia’s most strategically important businesses.