- The Washington Times - Tuesday, November 30, 2004

The American chief executive of Russia’s embattled oil giant Yukos yesterday held out little hope of saving the company from dismemberment by the Putin government this month.

Steven Theede, a former ConocoPhillips executive who replaced Yukos’ jailed founder Mikhail Khodorkovsky in June, said in a meeting with reporters and editors at The Washington Times that the government has rejected repeated offers that would have enabled Yukos to pay $24 billion in back taxes, and now the company cannot resort to bankruptcy to forestall a scheduled sale by the government of Yukos’ biggest oil-producing unit Dec. 19.

Even as he spoke, the government-owned Gazprom oil and gas enterprise emerged yesterday in Moscow as the likely buyer of the Siberian unit, Yuganskneftegas, which accounts for 60 percent of Yukos’ production and revenue. The 1 million barrels of oil produced each day by the unit equals Texas’ oil production.

While Russian law would seem to preclude such a naked “expropriation” of a leading corporation’s treasured assets to satisfy a back-taxes claim, Mr. Theede said he has given up hope that the Russian courts will rule in the company’s favor and prevent the sale.

“The courts have not been friendly toward Yukos” despite pleas that the forced sale violates provisions of the law that require the sale of noncore assets first to satisfy tax liens, he said. “The laws are good, but they aren’t being followed or enforced fairly.”

Speculation has emerged that Mr. Theede might be a target of the government’s widening enforcement net following a high-profile raid a week ago on the company’s executive offices. Mr. Khodorkovsky and a second Yukos executive have been in jail awaiting trial on fraud charges for more than a year.

But Mr. Theede said he is not fleeing the country, nor is he overly concerned for his safety, despite Russia’s selective and seemingly arbitrary enforcement of the laws.

“I fully intend to go back. There’s no indication that I shouldn’t go back,” he said, although he held out the possibility that he might stay out of the country if the U.S. Embassy advises him to do so.

The fate of Yukos, once Russia’s most celebrated oil company and a darling of Western investors, appeared sealed yesterday after Gazprom, Russia’s natural gas monopoly, confirmed speculation that it would bid for the Yugansk unit.

Sergei Bogdanchikov, the head of Gazprom oil subsidiary Gazpromneft, told reporters in Moscow that the purchase would be “the most profitable strategy” for the company.

The government is widely believed to have set the opening price for the auction at a low $8.6 billion to enable Russian companies to purchase the Yukos subsidiary without relying on capital from Western companies. Mr. Theede said Yugansk’s market value is at least $16 billion to $18 billion and could be as high as $30 billion.

“If they go through with the sale at this point, there’s no question it’s the first step in liquidation of the company,” he said, noting that Yukos would not have enough assets to satisfy the rest of its tax bills if Yugansk is sold for so little.

“It would be an irreversible act,” Mr. Theede said, saying Yukos is the victim of retribution campaign by Russian President Vladimir Putin against Mr. Khodorkovsky because the billionaire financed Mr. Putin’s opponents.

“This isn’t about taxes,” he said. “What we are seeing here is expropriation of assets 20th-century style.”

Mr. Putin has repeatedly denied the prosecution is politically motivated. He noted last week that Mr. Khodorkovsky was never personally involved in politics “so it is wrong to cast the criminal side of this case as political.”

But Mr. Theede said Yukos clearly has been singled out by the government.

It paid as much or more in taxes as other Russian oil companies before the crackdown, he said, and since then other companies have been slapped with minor fines while the book was thrown at Yukos.

Repeated offers by Yukos to sell assets and pay the back taxes claims have been rejected or ignored by the government, belying Mr. Putin’s broader agenda, he said.

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