Report: Yukos faces $5bn tax bill
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Khodorkovsky was jailed on charges of fraud and tax evasion.
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MOSCOW, Russian (Reuters) -- The problems of Russian oil giant YUKOS, struggling to save its merger with Sibneft, appear to have deepened with a report that tax authorities had accused the company of owing some $5 billion in back taxes.
Russian news agency Interfax said the Tax Ministry had made the allegation in a letter to the public prosecutor's office. YUKOS immediately denied that it had been evading tax payments.
"We consider the claim of 150 billion roubles ($5.05 billion) of tax arrears absolutely improper," said YUKOS spokesman Alexander Shadrin.
YUKOS, whose former chief executive Mikhail Khodorkovsky was arrested in October, has been subjected to relentless pressure from prosecutors in recent weeks.
The prosecutors, who have accused billionaire Khodorkovsky of tax evasion and fraud, are widely believed to have acted at the bidding of the Kremlin, which is anxious to curb the powerful businessman's political ambitions.
Neither the tax authorities nor the prosecutor's office would comment on the Interfax report. YUKOS has repeatedly denied it has cut corners in paying tax.
On Tuesday, Economy Minister German Gref told Reuters that Russian companies must stop exploiting tax "loopholes," but said he was not singling out YUKOS.
Analysts said YUKOS's tax woes may have been a reason why Sibneft, which agreed in April to merge with it to create the world's fourth-biggest oil company, announced abruptly on Friday that it was suspending the deal.
Shareholders in YUKOS say they are fiercely resisting calls from Sibneft's main shareholders, led by Roman Abramovich, the owner of London soccer club Chelsea, to surrender management control of the merged company as the price of saving the deal.
"I would be surprised if they (Sibneft) did not have a sense YUKOS would be facing a big tax bill. It's hard to fault them for wanting to renegotiate," said Paul Collison, an analyst in Moscow with UBS Brunswick.
By suspending the merger, Sibneft's owners have put huge pressure on YUKOS's owners, including Khodorkovsky. The deal was all but completed when he was arrested in October.
Talks continue
Group Menatep, which represents YUKOS's core owners, denied a report in the Wall Street Journal on Tuesday that it was willing to give top management jobs in the merged company to Sibneft.
It said it still considered the merger valid and that any change to the terms should also be approved by minority shareholders, who were set to control a quarter of the shares in YukosSibneft.
Shares in YUKOS closed flat at $11.00 after a volatile session in reaction to media reports. Sibneft shares ended 1.4 percent higher at $2.50 after.
A source close to the negotiations said the possibility that YUKOS will make concessions to Sibneft in order to save the deal could not be completely ruled out.
"I think the sides will continue to negotiate with a view to putting some more Sibneft people in place. From a company perspective that would be the best solution," the source said on Tuesday.
Boris Berezovsky, a Russian tycoon living in exile in London and a former Sibneft shareholder, has accused the well-connected Abramovich of acting in league with the Kremlin to wrest control of YUKOS from Khodorkovsky and his associates.
The YUKOS shareholder source said it was no coincidence that a judicial assault on YUKOS was gaining in intensity.
"Now they are not only after our top shareholders, but are trying to destroy the management structure, by questioning managers and launching new cases, such as on our refineries in Samara" he said.
Escalating risks
A key shareholder in YUKOS, Leonid Nevzlin, has said he sees little chance of the merger being revived. Nevzlin fled to Israel, fearing prosecution after Khodorkovsky's arrest.
In another blow to YUKOS, investment bank Brunswick UBS said on Tuesday it was downgrading its rating on the company to "neutral" from "buy" as a result of Sibneft's suspension of the merger.
It also said it had lowered its one-year price target on YUKOS to $10.7 from $15.6 and to $42.8 for its American Depositary Receipts from $62.4.
"We believe the underlying risks have materially escalated with these events, and that there is a significant risk the merger will not go through," said Brunswick UBS in a research note.
Some analysts believe Khodorkovsky may ultimately be prepared to cede top management positions to Sibneft in order to save the merger from collapse and spare his company from possible dismemberment if its exploration licenses are revoked.
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Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
