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Group Offers to Pay Yukos Tax Debt

Kremlin Silent on British Bid To Save Russian Oil Giant

By Peter Baker
Washington Post Foreign Service
Saturday, July 24, 2004; Page A14

MOSCOW, July 23 -- A British-based consortium of investors offered Friday to pay the beleaguered Yukos Oil Co.'s crippling tax debts in exchange for control of the company, the latest bid to head off the collapse of Russia's largest oil producer.

The offer heartened jittery investors but met with the same silent response from the Kremlin that greeted 11 settlement proposals made by Yukos. The government has indicated no interest in resolving the politically charged battle amicably and moved this week to strip the energy giant of its main production unit.


Former Yukos chief Mikhail Khodorkovsky, left, on trial with business partner Platon Lebedev in Moscow, said he welcomed constructive ideas for saving his company. (Anton Denisov -- Reuters)

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The British proposal, however, seemed to intrigue Yukos's imprisoned chief shareholder, Mikhail Khodorkovsky, who instructed one of his attorneys to tell reporters that he welcomed any constructive ideas for saving the company and dispatched another attorney to London to meet with the investors.

The group includes a former Yukos board member, Konstantin Kagalovsky, who served as an aide to President Vladimir Putin's predecessor, Boris Yeltsin.

In a letter to Putin, the group offered to pay all of Yukos's tax liabilities, estimated at $10 billion once all pending audits are complete, and then buy Khodorkovsky's controlling interest in the company. It was not disclosed how much the group would pay for that.

The offer was made as Khodorkovsky suffered another setback in his criminal trial on fraud and tax evasion charges in a Moscow court. Attorneys for Khodorkovsky and his billionaire partner and co-defendant, Platon Lebedev, petitioned the court Friday to dismiss fraud charges stemming from the 1994 privatization of a fertilizer company, claiming the 10-year statute of limitations had expired.

The three-judge panel rejected the motion without ruling on its merits, agreeing with the prosecutor that he should be allowed to finish presenting all his evidence first.

Lebedev, addressing the court from the cage where he and Khodorkovsky sit, mocked the decision even before it was made. Citing an old proverb, he said, "Any matter that makes sense has its end, and nonsense can continue endlessly. So you can see who is doing what here."

The legal campaign against Khodorkovsky and his company is widely interpreted here as a political struggle between Putin and the country's richest tycoon. In the process, the government has driven Yukos to the brink of bankruptcy.

After visiting Yukos to meet with its American chief executive, U.S. Ambassador Alexander R. Vershbow told reporters Friday that the United States was troubled "by the implications of the case for the rule of law and the solidity of property rights." The British ambassador also expressed concern.

Investors abandoned Yukos stock in droves after an announcement by the government Tuesday that it would seize and sell the company's main subsidiary, whose worth has been calculated at as much as $30.4 billion, in order to pay off an overdue $3.4 billion back tax bill. The British consortium's bid halted the slide and pushed share prices up 6 percent on Friday.


© 2004 The Washington Post Company