Shareholders of the embattled Russian oil giant Yukos will hold an emergency meeting next month to consider a bankruptcy filing for the company following the decision of Russian tax authorities to impose $6.7 billion in new back taxes on a company that is already reeling from tax debts, the company's chief executive officer said Wednesday.
"The situation is unsustainable, we can't continue much longer," Steven Theede said. In a meeting with reporters in Moscow, he described the latest tax assessment for 2002 as "laughable."
The bill is on top of $4 billion that Yukos still owes in back taxes from 2000 and 2001, and $3.4 billion that was recently levied against its subsidiary Yuganskneftegaz. That unit, Yukos's most prized asset, produces 1 million of barrels of oil a day.
Yukos's back tax bills resulted from authorities' decision to reopen the company's books from past years and disallow tax shelters that they had previously approved.
The state has said it plans to sell Yuganskneftegaz to pay off the bill, which could rise again when the tax authorities announce Yukos's back debt for 2003.
The value of Yukos stock has dropped 26 percent this week, and its tax debts now are nearly double its market value. Uncertainty about the company's future has also helped drive up oil prices worldwide.
The decision to consider bankruptcy appears designed to give Yukos some control over how its assets are disposed of and slow down what appeared to be imminent action by the state to strip the company of Yuganskneftegaz. The bankruptcy process can take up to two years in Russia.
"For Yukos, it's the most reasonable strategy imaginable -- declare bankruptcy rather than wait and see its best assets sold off for a song," said Steven Dashevsky, director of research at Aton Capital Group in Moscow.
Dashevsky said Yukos still needs the approval of a Russian judge, which is far from certain, and even if the company succeeds in declaring bankruptcy, the court could appoint external management sympathetic to the state's apparent desire to dismantle the company. A court could also bring criminal charges against Yukos officials if it deems the bankruptcy application to be frivolous.
Despite those risks, analysts said, Yukos's management may have calculated that there was little choice but to force the issue to resolution and at the same time possibly embarrass President Vladimir Putin, who has said he doesn't want to see the company destroyed.
The case has unsettled foreign investors, many of whom view it and a parallel tax evasion and fraud case against Yukos founder Mikhail Khodorkovsky as retaliation for Khodorkovsky's dabbling in politics, which people in the Kremlin perceived to be a move against Putin. Russian officials have said they are simply cracking down on financial misdeeds.