Yukos Oil Company (ОАО НК
ЮКОС) is a petroleum company in Russia which, until recently, was controlled by Russian billionaire Mikhail Khodorkovsky and a
number of prominent Russian businessmen. Khodorkovsky has been imprisoned,
and others have fled Russia.
Background
Yukos is one of the world's largest non-state oil companies, producing 20% of Russian oil - about 2% of world production. Its
assets were acquired in controversial circumstances from the Russian Government during the privatization process of the early 1990s.
In April 2003, Yukos agreed to a merger with Sibneft, but the merger was soon undone in the aftermath of the arrest of Yukos CEO Khodorkovsky in October,
2003.
Tax claims
In July 2004, Yukos was charged with tax evasion, for an amount of over US$7. The Russian government accused the company of misusing tax havens inside Russia in the 1990s so as to reduce its tax burden.
Yukos claims its actions were legal at the time.
In a move to prevent bankruptcy, management made a friendly offer to the government to pay 8 billion dollars in a period of
three years.
A management presentation from December 2004 shows that the tax claims put the "total tax burden" for 2000, 2001, 2002, and 2003 at
67%, 100%, 111%, and 83% of the company's revenue during those years ([1] (http://www.yukos.com/mp_upload/images/dec10.pdf)). As a comparison, the annual tax bill of
Gazprom is about $4 billion on 2003 revenues of
$28.867 billion.
Bankruptcy
On 15th December, Yukos filed for bankruptcy protection in the United States, estimating its assets at $12.3 billion and its
debts at $30.8 billion, including "alleged taxes owed to the Russian government". It accused the Russian authorities of "an
unprecedented campaign of illegal, discriminatory, and disproportionate tax claims escalating into raids and confiscations,
culminating in intimidation and arrests".
Forced sale of assets
The high-profile arrest of Khodorkovsky is widely believed to have been due to his activism in the Russian political process. On October 31, 2003, shortly after the arrest of
the company's CEO, the Russian government froze ownership of 44% of the company's shares. The reason given was to prevent a group
of shareholders led by Khodorkovsky from selling large stake of the company to American investors.
A Yukos shareholders' meeting scheduled for December 20, 2004 is to discuss a "crisis plan". A Russian company must hold such a meeting before it can apply
for bankruptcy in Russia. The Russian Government sold Yukos' main production unit, Yuganskneftegas, at auction on December 19, 2004 to recover some of $28
billion in alleged tax debts, following the loss of an appeal by the firm.
Menatep, the company representing Mikhail Khodorkovsky, promised to
challenge the sale's legality in a number of countries, and to sue the buyer and any company helping to fund the deal. The
expected buyer was the 38% russian state owned company OAO Gazprom. Some European and
American oil firms have decided not to bid.
On December 19, 2004, the Baikalfinansgroup won the auction
for YUKOS's subsidiary Yuganskneftegas with a 260.75 billion rubles ($9.4 billion) bid.
Yuganskneftegas was a few months earlier valued to between $15bn and $17bn by DrKW which
the Russian government
hired to value the subsidiary.
Suggested financiers to the Baikal Finance Group are Gazprom, Sberbank, the Russian
central bank, China National Petroleum Corporation, Oil and Natural Gas Commission (India). The reason for this arrangement may be that
Gazprom fears international legal action against it after a Houston, Texas court ruling that barred Gazprom from bidding for the
unit.
According to people familiar with the auction only two bidders registered for, and
were present during, the auction process: Baikalfinansgroup and Gazprom's oil unit
Gazpromneft. Accounts from the
auction say that the first bid of $8.6bn came from Baikal. When the auctioneer asked Gazpromneft to offer its price, a
representative of the company asked to make a telephone call and left the room. A few minutes earlier, the auctioneer had told
participants that using a mobile phone or leaving the room was against the rules. When a Gazpromneft representative returned to
the room, Baikal made a bid of $9.3bn. Gazpromneft never placed a bid or spoke out.
Management
- CEO: Steven M. Theede
- CFO: Bruce K. Misamore
By mid-December, 2004, all members of the board of Yukos, and most of the company's senior managers, had left Russia, some of
them because of "fear of arrest" after being "summoned for questioning by prosecutors" ([2] (http://www.reuters.co.uk/newsArticle.jhtml?type=businessNews&storyID=627908)). According
to a December, 2004, Houston, Texas court filing the CFO resides in
Houston. According to a company spokeswoman the CEO resides in London, UK as of
December, 2004.
According to the Moscow Times of Friday, February 4, 2005. Issue 3099, Page 5, Mikhail Brudno and Vladimir Dubov fled to
Israel in 2003, and were seen on February 2nd, 2005 in Washington DC at an official
function of George W Bush. [3] (http://www.themoscowtimes.com/stories/2005/02/04/043.html) Both men are cited in an
international arrest warrant regarding their involvement in the Yukos tax case.
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