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Yukos attorneys plan to seek $20 billion

Attorneys for Russian oil giant Yukos told a U.S. bankruptcy judge Wednesday that the company plans to wait until a sale of its key production subsidiary is finalized then seek $20 billion in damages from the buyer.
/ Source: Reuters

Attorneys for Russian oil giant Yukos told a U.S. bankruptcy judge Wednesday that the company plans to wait until a sale of its key production subsidiary is finalized then seek $20 billion in damages from the buyer.

Yukos filed for Chapter 11 bankruptcy last week in Houston in a last-ditch effort to block the auction of Yuganskneftegaz — which pumps about 11 percent of Russia’s oil.

The company had hoped an emergency order issued by the U.S. judge would cancel the auction, but it went forward. The previously unknown BaikalFinansGroup offered the winning bid of just over $9 billion. The sale is set to close Jan. 7.

Yukos plans to seek $20 billion in damages from the new owner of Yuganskneftegaz. Some have speculated that Gazprom, an international oil-and-gas energy titan that’s 40 percent owned by Russia, was somehow involved in the winning bid.

Attorney Tony Davis told U.S. Bankruptcy Judge Letitia Clark at Wednesday’s status hearing that he is representing Gazpromneft, which had been created just months before the auction and was sold off Friday in a move Moscow analysts say was intended to dodge the U.S. bankruptcy court order blocking it from participating in the auction.

Clark issued the order to protect the company’s assets as part of its bankruptcy filing.

Davis said his firm does not represent Gazprom. He added that Gazpromeft did not participate in the auction as ordered by the court.

Yukos attorney Zack Clement said Yukos is pursuing Gazprom and Gazpromneft as possibly being behind the winning bid.

“We think they are alter egos,” Clement said.

“I’m getting tired of getting tried in the newspapers,” Davis responded.

Clement told Clark the court should take notice that the Russian government “is completely aware of these proceedings and attends.” He pointed out that Russian Consul General Nikolay Sofinskiy was in the courtroom Wednesday.

Clark asked if Sofinskiy would like to be heard and he declined.

“I prefer to stay here,” he said.

Yukos spokesman Richard Mintz said the “world’s most expensive game of hide-and-seek” is taking place.

“Gazprom, the Russian government and other Russian companies are clearly working together to cloak the true ownership of BaikalFinansGroup,” he said.

Lawyers and analysts said there were no agreements between Russia and the United States that could make the Houston court’s decision enforceable on Russian soil.

President Vladimir Putin on Tuesday affirmed the legality of the $9.3 billion sale of the crown jewel of the Yukos oil empire. He suggested the subsidiary’s new owners could eventually link up with another Russian energy company — or even a Chinese conglomerate.

The Russian government planned to sell the subsidiary to pay off some of the $27.5 billion in back taxes it says is owed by Yukos, Russia’s largest oil producer.

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.

Deutsche Bank seeks to dismiss Yukos bankruptcy
An attorney for Deutsche Bank AG Wednesday told a U.S. bankruptcy court judge the bank would seek to have the Chapter 11 bankruptcy claim of Russian oil giant YUKOS thrown out because the court has no jurisdiction over a Russian company.

Hugh Ray, a lawyer for Deutsche Bank, told Judge Letitia Clark, that the request to dismiss the bankruptcy case could be filed as early as Friday.

Over the weekend, the German bank backed out of supporting Russian natural gas monopoly Gazprom in bidding on YUKOS’ main production subsidiary.

The stricken Russian oil firm also may ask a U.S. judge Wednesday to find Gazprom in breach of a court order for participating in a weekend sale of YUKOS’s core asset, which could expose the state gas giant to asset seizures.

YUKOS filed for bankruptcy protection in Houston last week to stop Sunday’s sale, in which Yugansk was sold to the obscure Baikal Finance Group for $9.4 billion.

The YUKOS affair has shaken Russia’s reputation among foreign investors and the White House said it was disappointed Russia went ahead with the auction.