Putin: We Are Not Trying To Bankrupt Yukos

In a move that sent Russia’s stock market into frenzied trading, Russian President Vladimir Putin said on June 17 that authorities are not seeking to bankrupt embattled oil company Yukos. Putin, who is in Tashkent, Uzbekistan, to attend a summit of leaders of the six member states of the Shanghai Cooperation Organization (SCO), was asked by a Vremya Novostei correspondent whether Yukos’ bankruptcy would be good for the state from the point of view of Russia’s investment climate. Putin said that, while he was reluctant to answer, given that his comments could be used “both by Yukos’ competitors in the market and those who want to support the company…the authorities of the Russian Federation, Russia’s government and Russia’s economic authorities are not interested in the bankruptcy of a company like Yukos.” But he added, “As for what will happen in the court processes, that’s a different story. Here only the courts themselves can speak in the course of the investigation of the case.” Asked about the US$3.4 billion in back taxes and penalties that the Tax Ministry claims Yukos owes for the year 2000, Putin answered that it is also a matter for the courts to determine. But “if the law will allow it, then I think the government will do what it can so as not to bring down the company” (Vremya Novostei, June 18).

Putin’s comments came just one day before a court ruling that could determine Yukos’ fate. The Moscow Arbitration Court is scheduled today (June 18) to consider a Tax Ministry appeal reiterating its demand that Yukos pay the US$3.4 billion tax bill. That court already ruled in favor of the ministry’s demand on May 26. However, Russian law stipulates that the court’s decision comes into force within one month if no appeals are filed, but takes effect immediately once an appeal is considered (Bloomberg, June 18). The court will also rule on Yukos’ appeal of an earlier court decision. That decision rejected a request for the Tax Ministry’s case against the company to be dropped (Newsru.com, June 18). One Yukos source said that if the court rules that Yukos must pay the tax bill, it could trigger a chain of events leading to the company’s collapse as Yukos does not have sufficient funds to pay it off immediately (Moscow Times, June 18). Apparently the market took Putin’s comments as a signal to the Moscow Arbitration Court not to deliver this deathblow. Yukos shares, which have dropped precipitously as its tax problems have deepened, rose a staggering 34 percent and the MICEX and RTS indices rose 8.8 and 10.1 percent, respectively, for the day (Kommersant, Moscow Times, June 18).

But various observers have already suggested that Putin’s comments do not necessarily mean he has decided to commute Yukos’ death sentence. Those comments may have simply been a way to give the appearance that the Kremlin had nothing to do with the court’s decision if it rules against Yukos. Meanwhile, Yukos’ Deputy Chief Executive Officer Yuri Beilin and Aleksei Khamrakulov, head of the company’s labor union, wrote to Prime Minister Mikhail Fradkov offering the Tax Ministry and other government representatives a deal whereby Yukos would propose a two-year schedule for making the tax payments. That scheme would allow Yukos to continue operating. More significantly, Beilin and Khamrakulov also offered to acquire shares owned by the company’s main shareholders — presumably former Chief Executive Officer Mikhail Khodorkovsky and former Group Menatep head Platon Lebedev. The two are in jail and on trial for large-scale fraud and other crimes. A portion of Yukos’ assets would be sold to state-owned energy companies. Yukos would then use proceeds from the share sale to retire its tax bill (Interfax, June 18). It is not clear whether the entire company supports this offer. Radio Free Europe/Radio Liberty’s Russian service cited a Yukos statement denying that any talks are underway concerning the sale of its shares (RFE/RL, June 18).

Whatever the case, the emergence of a possible negotiated settlement between Yukos and the authorities is reminiscent of the situation involving media mogul Vladimir Gusinksy. Shortly after being arrested on fraud charges and briefly jailed in July 2000, Gusinksy signed an agreement giving control of his Media-MOST empire to main creditor Gazprom in exchange for canceling Media-MOST’s debts plus an additional US$300 million. Gusinksy subsequently renounced the deal, saying it had been signed under duress. But Gusinksy still wound up losing most of his Russian media holdings and living in exile. Many, if not most, observers watching the legal onslaught against Gusinksy and Media-MOST at the time believed it was politically motivated. That belief was shared by Spanish authorities, which refused a Russian request to extradite Gusinksy in 2001. Putin consistently denied playing any role in the case, insisting that it was a legal and law-enforcement matter in which he had no right to interfere.