The protracted legal battle over Russian oil giant Yukos appeared to enter its final phase Friday when the government set a date to auction off a majority stake in the company's richest energy fields and demanded another $6 billion in back taxes from a business already facing a crippling $14 billion bill for outstanding taxes and fines.
If the government follows through with the Dec. 19 sale -- and some investors were still hoping for a last-minute deal to salvage the company -- Yukos will end up a worthless shell. Key assets in the country's energy sector will probably fall into the hands of a Russian company friendly to the Kremlin at a discounted price, analysts said.
"Today's announcement is both stunning and expected," said Yukos chief executive Steven Theede in a statement. "What we are witnessing is, simply put, a government-organized theft to settle a political score."
The government's campaign against Yukos is widely seen as Kremlin retaliation against the company's founder, Mikhail Khodorkovsky, who was arrested a year ago. In a separate case, he is being tried on charges of tax evasion and fraud, and faces up to 10 years in prison. The Kremlin denies that the cases are politically motivated, calling them part of a crackdown on financial misdeeds.
In a legal notice posted on the Web site of the government newspaper Rossiiskaya Gazeta, the Federal Property Fund announced Friday that it would auction off 76.8 percent in the Yuganskneftegaz unit, a collection of oil fields that produces 1 million barrels a day or about 60 percent of Yukos's output.
A minimum bid was set at $8.6 billion, lower than even conservative estimates of the unit's value. In a report commissioned by the government, Western investment bank Dresdner Kleinwort Wasserstein, had valued Yuganskneftegaz at between $14.7 billion and $17.3 billion, but also gave what it called an "overly conservative" estimate of $10.4 billion.
The auction was set to take place one day before Yukos shareholders were to consider filing for bankruptcy protection, a step that might have protected their assets from immediate seizure or sale.
Within hours of the auction's announcement Friday, the federal tax service added to the pressure on the company by demanding an additional $6 billion in back taxes and fines for 2003. The company said it and its subsidiaries still owed about $14 billion based on recalculation of its taxes for the years 2000 through 2002.
Trading in Yukos shares on the Moscow Interbank Currency Exchange was suspended after they fell by nearly 30 percent.
At its height, Yukos was valued at close to $40 billion and was widely admired for introducing Western-style management and transparency. But its founder and major shareholder Khodorkovsky, now 41, appeared interested in a political role as a rival to President Vladimir Putin. Before his arrest, he had a sharp exchange with the president at a meeting in the Kremlin, and contributed money to parties opposed to him.
His trial is expected to end early next year. Yukos, in the meantime, was audited, and federal tax authorities have piled one back bill on another, threatening to strip the company of assets and licenses to pay those bills.
Putin didn't comment on Friday's announcement, but Deputy Prime Minister Alexander Zhukov said in New Delhi that the sale of Yukos assets was "not in the government's hands" and was decided by "other agencies."
Despite nearly 30 statements by the authorities that they planned to begin stripping the company, they have not actually followed through on their threats. William F. Browder, head of Hermitage Capital Management, an investment firm here, said there was still a chance that the auction could be abandoned and the company saved, but only if Khodorkovsky forfeited his personal ownership stake, which was once valued at $10 billion.
"In Russia, the negotiations don't begin until the gun is put to someone's head and cocked," he said.
But other analysts said that a deal would have been made already and that Yukos appeared to be doomed. "The scenario where Yukos becomes worthless has increased dramatically," said Alex Kormschikov, an analyst at Nikoil Capital Market Research in Moscow.