Latest Yukos Stay Of Execution Is Rescinded

Publication: Eurasia Daily Monitor Volume: 1 Issue: 68

Yukos’ topsy-turvy fortunes took another sharp dip downward on August 5, when the Justice Ministry announced it had revoked an earlier decision by court bailiffs allowing the company to use frozen funds to pay for day-to-day operations. Meanwhile, some analysts suggested that the contradictory decisions were part of an effort by people in high places to profit from insider trading.

Yukos appeared to be on the ropes last month after the Justice Ministry announced plans to sell off the company’s main production facility, Yuganskneftegaz, in order to collect $3.4 billion in taxes and penalties that the government claims Yukos owes for the year 2000. Yukos CEO Steven Theede, meanwhile, warned that court rulings freezing the company’s assets and accounts meant that by “some time in the first half of August” the company would no longer be able to cover its operating expenses (Moscow Times, July 23; see also EDM, July 23). However, a glimmer of hope appeared on July 30, when Russian news agencies quoted Andrei Belyakov, head of the Justice Ministry’s Court Marshals Service, as saying that Yukos was ready to accelerate payments on its 2000 tax bill and would be given a month to pay it off. The news sent Yukos’ stock up 12%. The Bloomberg news agency, however, quoted Belyakov as denying that the company had been given a month to pay off the bill.

Whatever the case, optimism was stoked again on the evening of August 4, when Yukos announced that court bailiffs had informed it that its accounts used to fund ongoing operations were not blocked. The company welcomed the news, and its stock soared by as much as 11% at the start of trading on August 5. Arkady Volsky, head of the Russian Union of Industrialists and Entrepreneurs (RSPP), said the bailiffs’ announcement was evidence of “positive movement” in the Yukos case and the result of his group’s efforts to resolve the crisis, including talks with the government (Interfax, August 5). Later in the day, however, the Justice Ministry released a statement countermanding the bailiffs’ decision. “All funds that have come onto the company’s accounts or will come onto the company’s accounts will be arrested and transferred to the budget as payment for the debt,” the statement read (Interfax, Itar-Tass, Associated Press, August 5). The Justice Ministry also announced that court bailiffs had ordered the freezing of Yukos property in 20 of Russia’s 89 regions. This latest bad news sent Yukos shares down more that 14% on the Moscow Interbank Currency Exchange (MICEX) (, August 5).

Commenting on the latest quick reversal of Yukos’ fortunes, Sergei Suverov, head of equity research at the Moscow-based Bank Zenit, told the Moscow Times, “Government officials seem to be making contradictory announcements and there doesn’t seem to be any single information policy — that may be evidence of different groups struggling over the fate of Yukos. This is a market of speculators, not investors” (Moscow Times, August 6). Other observers had a more conspiratorial interpretation of the latest developments. “One gets the impression that the market is simply being manipulated,” Alexei Belashov, an analyst with the Moscow-based Barrel investment company told “It’s simply a shame for the market. Yesterday they were saying one thing; the market went up. Today they took their words back; Yukos shares fell. Thoughts instinctively arise that a game is going on involving the use of insider information” (, August 5). Similarly, Novye izvestiya wrote: “It is hard to believe that the jumps in [the price of] the company’s stock were 100 percent coincidental. Experts are increasingly saying that insider information is being used” (Novye izvestiya, August 6).

Meanwhile, Economic Development and Trade Minister German Gref predicted during an August 5 cabinet meeting that capital flight this year would reach $8 billion-$8.5 billion compared with $2.9 billion in 2003 — a nearly three-fold increase. While Gref did not venture a guess as to why this might happen, noted that the Russian government had originally predicted a net capital inflow for 2003, but that money began leaving the country in the third quarter of last year after the arrest of top Yukos officials and shareholders and the tax authorities’ moves against the company (, August 5).