Russia Signals Deal Possible Over Tax Arrears of Oil Giant
By Peter Baker
Washington Post Foreign Service
Tuesday, June 22, 2004; Page A10
MOSCOW, June 21 -- The government opened the door Monday to negotiations over the fate of the embattled Yukos Oil Co., suggesting that it might reach a settlement with the company in a politically charged legal case that has threatened the viability of one of Russia's biggest private businesses.
The government's newfound willingness to strike a deal could resolve a multibillion-dollar back-tax bill that Yukos has said could force it into bankruptcy. But the dialogue is focusing entirely on the legal troubles of the company and not of its chief shareholder, Mikhail Khodorkovsky, who on Monday lost another appeal to be released after eight months of pretrial imprisonment.
The positive signals from senior government officials came days after President Vladimir Putin said it was not in the nation's interest to bankrupt Yukos. Speaking to reporters at an investors' conference in Moscow on Monday, Finance Minister Alexei Kudrin suggested Yukos could be allowed to pay off its tax bills by selling assets, something currently banned by a court ruling obtained by prosecutors.
"As far as I know, cooperation is taking place with regard to the possible payment of obligations," Kudrin said, noting that Yukos offered several potential settlement ideas to the government last week.
Until now, the government had dismissed those proposals. But Kudrin's deputy, Sergei Shatalov, told reporters that the government would be willing to consider reducing the overall back tax bill as part of a settlement, according to the Interfax news agency.
The federal tax service has hit Yukos with a $3.4 billion bill for taxes, penalty and interest from the year 2000. Company executives and analysts expect similar bills for subsequent years to eventually push up the total amount to at least $8 billion. Yukos has lost several appeals and all but acknowledged that it would ultimately fail in court.
Company officials have said they could not pay the initial $3.4 billion in one lump and needed to either sell assets or pay in installments.
"We need time, several months," the company's chief executive, Simon Kukes, told reporters Monday. "We just need to understand the goal of the government. If it wants to get the money and keep the company efficient, we need time. If it just wants the money, we will, of course, lose on the sale."
Among the settlement proposals Yukos has floated is the issuance of new stock that would dilute the stakes of Khodorkovsky and his partners to just 25 percent and possibly turn over partial ownership of the company to the state.
Khodorkovsky separately faces criminal charges of tax evasion and fraud, as does his billionaire partner, Platon Lebedev. They will return to court Wednesday for more hearings in preparation for a joint trial.
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