The Russian government issued conflicting signals Tuesday about whether it would negotiate with the giant Yukos Oil Co. as the clock ticked toward a Wednesday deadline to pay a tax bill that could bankrupt the company.
A week after the government cut off secret talks with Yukos, Deputy Finance Minister Sergei Shatalov said authorities would still be open to restructuring nearly $7 billion in the company's tax debts. "I'm saying purely hypothetically that, theoretically, this possibility exists," he told Russian journalists. "A political decision is needed."
His statement sent Yukos stock soaring by more than 20 percent as investors concluded that the politically charged dispute could be resolved without destroying Russia's largest oil producer.
But within hours, Russia's chief prosecutor doused the enthusiasm by saying that Yukos could pay the bills without any concessions and raising the prospect that the government might hit the company with more tax demands.
"This is like a snowball," Prosecutor General Vladimir Ustinov said on Echo Moskvy radio. "This case has a beginning but it's very difficult to see its end."
The contradictory statements provoked more uncertainty about the fate of what was once Russia's most successful private enterprise. The renewed concern erased some of the market gains made earlier in the day, with Yukos stock finishing up 7 percent.
A Moscow court has given Yukos until the close of business Wednesday to pay the first $3.4 billion in back taxes demanded by the government, but the court has frozen many Yukos assets and the company says it cannot pay.
Chief Financial Officer Bruce Misamore said Tuesday that Yukos had about $1.4 billion in cash and could pay the rest of the bill if it were allowed to negotiate an installment plan. But he said the state abruptly halted discussions last week and had not been willing to compromise.
"We're just trying to make our best efforts to reach a resolution to the situation," the Yukos executive told investors during a conference call. "But first they've got to talk to us."
Yukos sent a fresh settlement plan to the government Tuesday, offering the stake of its imprisoned chief shareholder, Mikhail Khodorkovsky, to pay off the tax debts, the Financial Times reported on its Web site. Under the plan, some or all of Khodorkovsky's shares would either go directly to the government or be sold to raise cash and the company would be given three years to settle the debt.
Misamore said production had not been disrupted and that the company had prepaid transport and other fees to keep shipping oil until at least the third week in July. The bank accounts frozen so far have just $20 million in them, he said. Misamore said that he met Tuesday with representatives of foreign banks that had declared Yukos in default on a $1 billion loan and that they had not yet demanded payment.
Ustinov, the prosecutor who imprisoned Khodorkovsky, expressed little sympathy for "poor Yukos."
"The profits that Yukos made could easily pay the company's debts," he said. He suggested the state may demand back taxes for 2002 and 2003 in addition to those already claimed for the two earlier years.
The case is "raising fundamental questions in the minds of many investors," a senior U.S. diplomat said Tuesday, speaking on condition of anonymity. There were "increasing signs that destruction of the company is the intended endpoint," he said.