- The Washington Times - Wednesday, December 15, 2004

MOSCOW (AP) — Embattled Russian oil giant Yukos made a last-ditch legal bid yesterday to halt the looming auction of its core production unit after filing for bankruptcy protection in a U.S. court.

Yukos sought an injunction against the sale of its Yuganskneftegaz production unit. An auction is set for Sunday.

Yukos made the emergency filing for Chapter 11 protection on Tuesday in U.S. Bankruptcy Court in Houston, after management for the company that pumps a fifth of Russia’s crude oil decided there was no way the halt the process through the Russian legal system.

“Our management board concluded that there is absolutely no chance of our obtaining justice in the Russian court system,” Chief Financial Officer Bruce Misamore said in his affidavit submitted to the court.

In Houston, U.S. Bankruptcy Judge Leticia Clark did not rule on the request, but scheduled a hearing for today on the temporary restraining order to stop the auction of the production unit.

Yukos lawyer Mark Baker said the company needs a decision soon. Waiting until tomorrow could make it difficult to file the proper paperwork to stop the auction scheduled for Sunday because of the nine-hour time difference between Houston and Moscow.

“We think it is a real emergency,” Yukos lawyer Zack A. Clement said.

But even if the court grants Yukos jurisdiction, cancels the auction and grants the company protection, lawyers and analysts said the Russian government would give the rulings short shrift.

Seen as a Kremlin-inspired effort to punish former Chief Executive Officer Mikhail Khodorkovsky’s perceived political ambitions, the campaign against Yukos and its owners has sent the company’s value plunging. Mr. Khodorkovsky, who has been in jail for 14 months, is being tried on charges including fraud and tax evasion.

President Vladimir Putin has cast the case as part of official crackdown on shady bookkeeping and corruption.

In its filing, Yukos said that as of Oct. 31, its total assets equaled about $12.276 billion and its total debts were about $30.79 billion, including “alleged taxes owed to the Russian government.” It said it had from 200 to 999 creditors.

Foreign institutional investors, who hold about 15 percent of Yukos’ common stock, have lost about $5.7 billion since April, Yukos’ court documents said.

In April, Yukos capitalization was $40 billion, but has since plummeted to just $2 billion today, the company said.

Tax authorities say Yukos owes them $27.8 billion, and the auction of Yuganskneftegaz, which produces some 60 percent of Yukos’ oil, would cover a part of the bill.

Observers suggest that the tax claims have been engineered to transfer the unit to a Kremlin-connected company — most likely state natural-gas giant Gazprom.

“There can only be one real winner in this auction: Gazprom,” Mr. Misamore said in Yukos injunction request.

Yukos officials say the auction’s starting price of $8.6 billion is a giveaway and cite the $15 billion to $18 billion valuation quoted by a Western investment bank.

“If the auction is consummated, Yukos will be permanently, severely and irreparably damaged,” the court filing said.

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