July 1 was a bad day for Yukos, and perhaps the beginning of the end for the embattled oil company. First, three court bailiffs, accompanied by five guards in camouflage uniforms, arrived at the company’s Moscow headquarters to inform Yukos that it had five days to pay off the $3.4 billion in back taxes and penalties the Tax Ministry says it owes for the year 2000 — a claim that the Moscow Arbitration Court upheld on June 29. According to Yukos spokesman Aleksandr Shadrin, the company offered the bailiffs collateral in the form of the 35% stake in the Sibneft oil company that Yukos acquired as part of merger deal last year that subsequently went sour. According to Shadrin, the bailiffs ignored the proposal. Later on July 1, the bailiffs froze all of Yukos’ accounts held in Russian banks. In response, the company released a statement warning that freezing the bank accounts directly threatened Yukos’ operations and its ability to pay current taxes and honor its commitments to creditors (Gazeta, Interfax, July 1; Moscow Times, Vedomosti, July 2).
The other shoe dropped on Yukos when Russian news agencies reported on July 1 that the Tax Ministry had presented the company with another tax bill totaling 98 billion rubles — again, about $3.4 billion — for back taxes and penalties, this time for the year 2001. A unnamed source within the ministry said that an audit of Yukos’ 2001 tax payments found that the company had illegally concluded deals with front companies it set up in then-existing domestic tax havens like Mordovia, Evenkia, and Kalmykia in order to evade taxes (Interfax, July 1). While Yukos spokesman Shadrin said the Tax Ministry had not notified the company about any new tax bill, press reports about the penalties sent the company’s shares plummeting more than 12% on the Moscow Interbank Currency Exchange (RosBusinessConsulting, July 1).
All of this increases the likelihood that Yukos’ international creditors will announce default on $2.6 billion in loans extended to the company — a development that, as the Moscow Times reported, would “almost certainly” lead to the company’s bankruptcy. “A combination of the two tax bills will almost definitely lead to the sale of core assets,” Steven Dashevsky, head of research at Aton Capital, a Moscow-based brokerage, told the newspaper. “Yukos in its current shape and form is not likely to exist” (Moscow Times, July 2). And the latest tax bill may not be the last: a source close to the Tax Ministry told Prime-Tass that the back taxes and penalties Yukos will be asked to pay could total around $10 billion (Prime-Tass, July 1).
Meanwhile, President Vladimir Putin, who said on June 17 that he opposes bankrupting Yukos, met in the Kremlin on July 1 with Russia’s business leaders. Among the topics discussed were administrative reforms, housing construction and mortgages, education, and vocational training. The issue of Yukos was not discussed (Itar-Tass, Interfax, July 1).