This time last year, Yukos Oil company was the dynamic success story of Russian capitalism, a growth engine pumping more crude than Libya as it raced past every other oil producer in the country and prepared to take on the international majors on their own terms.
Today, Yukos faces bankruptcy. Almost every day brings another court defeat in its battle to stave off government tax collectors. On Saturday, about 60 law enforcement officers swarmed through its headquarters to open yet another investigation. With its bank accounts frozen, the company says it is preparing to begin suspending operations within days.
The precipitous fall may reach bottom as early as this coming week, many analysts here say. Rather than negotiating a deal, the government has turned up the pressure in recent days, leading Yukos executives and independent analysts to conclude that the confrontation would end only with the company's bankruptcy, breakup or takeover. The government will either assume control of Yukos itself or parcel out its assets to other companies.
"I have not noticed any willingness to make a deal," said Sergei Pepelyayev, an attorney for Yukos. "It appears the objective is either to break up the company, to destroy it or to replace the owners. It's a kind of de-privatization," he said, a reversal of the sale of government assets in the 1990s.
A death blow could result if the government enforces its decision to double its demands for back taxes to nearly $7 billion, almost half the company's already diminished market value.
"That will kill it," said Igor Yurgens, vice president of the Russian Union of Industrialists and Entrepreneurs, an organization of the country's biggest tycoons. The next stage, he added, will be a struggle over the pieces of the firm. "Very powerful groups will be fighting for it. What will be the final result, I don't know."
The government slapped Yukos with the new tax bills after reopening completed tax audits of the company and recalculating its liability under a more restrictive interpretation of tax shelter law.
The action against Yukos has run parallel to a politically charged struggle between the Kremlin and the company's chief shareholder, Mikhail Khodorkovsky, who is in jail awaiting trial on fraud and tax evasion charges.
Two weeks ago, it appeared Yukos might be saved after Putin said publicly that he was "not interested" in the bankruptcy of the company. But no respite in government pressure followed. If anything, officials pushed harder. They pressed ahead with the tax claims and rejected multiple attempts to open negotiations.
On Saturday, dozens of government agents in plain clothes staged a surprise raid on Yukos headquarters, a polished skyscraper in southern Moscow, to scour through files in what prosecutors suggested was an expanded criminal fraud and tax evasion investigation. So far, the government has brought criminal charges only against Khodorkovsky and other shareholders as individuals; the case against the company is a civil tax case.
Alexander Shadrin, a Yukos spokesman, said the agents seized computer servers that are critical to company operations, potentially threatening production. Russian news agencies later reported that the servers were not removed from the building. "They don't understand what they're doing," Shadrin said, in reference to the seizure of the computers. "We don't understand why they're doing this on a Saturday."
A Moscow court has given Yukos until Tuesday to pay $3.4 billion, the first half of the tax claims, but Yukos has said it has only $1 billion in cash. Authorities have already obtained a court order freezing Yukos's assets, making it impossible for the company to sell property to raise the money. Court bailiffs have also ordered the company's bank accounts frozen.
Although it is not clear which accounts are affected, the company has said it would not be able to operate much longer.
"This kind of action could lead to a suspension of company activity," Viktor Gerashchenko, a former chief central banker who was appointed chairman of the Yukos board last month in a bid to seek a settlement, told reporters Friday.
A full shutdown could idle up to 100,000 employees and stop production at wells that pump more than 1.5 million barrels of oil a day, nearly two-thirds of which is exported.
Anticipating such a development, the company arranged to pay most employees their monthly salaries on Friday, about 10 days early, but might not be able to pay its utility bills, vendors or creditors. Lenders have warned they may declare Yukos in default.
"It will lead to a gradual shutdown of the company," said spokesman Hugo Erikssen.
Yukos has already suffered severe financial damage. Its merger last year with Sibneft, which made the combined firm the world's fourth-largest private oil producer, fell apart under pressure from the Kremlin.
The company has lost about $20 billion in market value as its stock plunged, leaving it worth perhaps $15 billion today. Shares fell another 17 percent Friday after the government's latest moves, and Standard & Poor's again cut the company's credit rating.
Some investors retain hope the company can be salvaged. Boris Jordan, a Russian American investment banker and president of the Sputnik Group, has been leading an effort by minority shareholders in Yukos to negotiate a settlement.
To do it, he maintains, the majority owners need to turn over the company to new independent managers who can make a deal.
"There's so much mistrust that's built up over the years between the government and the managers," Jordan said in an interview.
But the events of the last week have made him increasingly skeptical. "I don't see any progress being made," he said. With each passing week, he added, "the likelihood of some kind of breakup or significant sale of assets really increases because the situation seems to continue to accelerate."
Already a rival state-owned oil firm, Rosneft has begun pressing the Kremlin for the right to cherry-pick Yukos's best refineries and fields. Its executives feuded with Khodorkovsky last year. "Rosneft is very actively lobbying for the breakup of Yukos," said Jordan. Another state-controlled energy firm, Gazprom, has publicly hinted at its interest in buying Yukos assets as well.
Putin met at the Kremlin for several hours this week with senior business leaders, and neither he nor they mentioned the word Yukos once, although there was a passing inferential mention, according to people who were present.
Steven Dashevsky, managing director of research at Aton Capital Group, a Moscow brokerage, said the hopes raised by Putin's statement last month were exaggerated. At most, he said, Putin's government may avoid throwing Yukos into literal bankruptcy, but that would be only a semantic distinction.
"It's a simple situation -- a company is presented with massive tax obligations" and to pay them "it will have to shed core assets," Dashevsky said. "Even if it's not bankruptcy by [name], it's going to be bankruptcy by process."