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Circumventing Court, Russia Seizes Yukos Unit

By Peter Baker
Washington Post Foreign Service
Tuesday, August 10, 2004; Page A15

MOSCOW, Aug. 9 -- The Russian government seized the main production unit of Yukos Oil Co. again on Monday night, circumventing a court that ruled the move illegal just three days earlier and renewing the threat to take apart the country's largest oil producer.

The Russian Justice Ministry's court bailiff service announced that the court had confiscated the Yukos unit "under new circumstances," offering a different technical rationale for the seizure than the one struck down Friday.

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The seizure seemed to confirm predictions by analysts that the government would not let an adverse court ruling stop its campaign to dismantle the empire of Mikhail Khodorkovsky, the imprisoned oil baron who is a political adversary of President Vladimir Putin. The seized Yuganskneftegaz production unit pumps 1 million barrels of oil a day, or 60 percent of Yukos's output, and without it the company has said it would be forced into bankruptcy.

The government plans to sell Yuganskneftegaz to recoup $3.4 billion in Yukos back taxes from 2000, but the production unit is worth far more than the tax bill, according to analysts. The company has valued the reserves held by Yuganskneftegaz at $30 billion, while independent investment houses have assessed the unit at anywhere between $12 billion and $20 billion.

Many analysts expect the government to sell Yuganskneftegaz to a company either owned or heavily influenced by the state. The same Moscow court that invalidated the first seizure of the subsidiary Friday reversed course Monday and upheld the seizure of another Yukos subsidiary, Tomskneft, even though the actions had been nearly identical.

The sharp turns in the Yukos case over the past week have left investors on the Russian stock market with a sense of financial whiplash. As each day produces seemingly good news or bad, the Yukos stock price bounces up or down dramatically.

The company's shares fell 12 percent Friday on news that the government refused to let Yukos use frozen bank accounts to keep operations running. Then the court decision on Yuganskneftegaz was released after trading closed and Yukos shares soared 17 percent Monday, jumping so fast that trading on one index had to be briefly halted. The Justice Ministry announcement bypassing the court ruling came after business hours Monday and likely will send the stock down Tuesday.


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