Yukos tax problems set to snowball
By CNN Moscow Bureau Chief Jill Dougherty
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MOSCOW, Russia (CNN) -- As Russia's deputy finance minister indicated that the government and oil giant Yukos could reach an agreement to restructure a multi-billion-dollar tax bill for 2000, the Russian prosecutor general Tuesday said that the company may be forced to pay back taxes for other years, too.
"This is a snowball. This case has a beginning, but it is very difficult to see the end," Prosecutor General Vladimir Ustinov told radio station Echo in Moscow.
Former Yukos CEO Mikhail Khodorkovsky and his close associate, Platon Lebedev, are facing trial on charges of fraud and tax evasion totaling more than $1 billion.
Although the legal cases are technically separate, some observers believe they are both part of a Kremlin-directed effort to take over the company and eliminate Khodorkovsky's economic and political clout.
"There are signs that the destruction of the Yukos Oil Company is the end game," a senior U.S. diplomat said.
"The scale of the misappropriation, abuse and tax evasion is so large that they were unable to fit it into one case," Ustinov said.
"Therefore, other branches of the same case were separated into individual criminal proceedings."
Earlier, Deputy Finance Minister Sergei Shatalov said its was "theoretically" possible that the government and Yukos could find a way to get the $3.4 billion tax bill paid. The news sent Yukos shares up 22 percent.
But Yukos spokesman Hugo Erikssen told CNN the company "knows of no deal" and said the mood there is "very pessimistic." He said Yukos has signaled its willingness to talk with the government for weeks.
"Maybe the government sees that bankruptcy would be bad and some in the government are urging a solution," Erikssen said.
In addition to the 2000 taxes, the Russian Tax Ministry is demanding the company pay another $3.4 billion in back taxes from the year 2001.
Ustinov, on the radio Tuesday, added that "there is also 2002 and 2003."
And on Monday, Yukos announced that a group of international lenders had informed the company that it was in technical default on a $1 billion loan. Although the lenders are not demanding immediate payment, the move put more pressure on the beleaguered oil company.
Ustinov complained about the way Yukos' troubles have been reported.
"Everybody is saying 'poor Yukos' -- why is nobody judging them for the fact that such an enormous amount of money has been taken from schools, hospitals and other social problems, as this money should have gone to the state budget?" he asked.
The company's shareholders, who have received "enormous" dividends, could easily repay the tax bills, he said.
The senior American diplomat told CNN Tuesday that there is "an extraordinary game of brinkmanship being played out here."
The moves are "creating new anxieties among investors and damaging Russia's image abroad," the American diplomat said.
The United States, the diplomat said, "will hold Russia to their own word that the trial of Mikhail Khodorkovsky will be open."
Speaking about the recent legal action against Yukos Oil Company, the diplomat said "we hope they will pull back from the brink before it is too late."
The events "raise questions on property rights, that the ownership of assets can be called into question."
The diplomat said the United States has not gotten directly involved in any lobbying on behalf of Yukos.
Asked how he interprets Russian President Vladimir Putin's comments that the Russian government is not interested in the bankruptcy of Yukos, this senior diplomat said:
"With each passing day, it is harder and harder to answer that question."
He added, "Clearly, this case reflects deep animosity between Putin and Khodorkovsky" and "now other forces are at work, moving according to their own logic. It appears his comment had only a momentary effect."
The diplomat described events with Yukos as a "game of chicken with two cars racing toward each other and getting closer to the cliff."
Asked whether the United States government is warning U.S. companies to beware of doing business in Russia, he said, "We've always urged caution because of the vagaries of the legal system, but we've been urging an extra measure of caution because of Yukos."
"Oligarch-bashing plays well with the Russian public."
Asked how this will affect the investment climate in Russia, the diplomat said, "The markets themselves will be the ultimate arbiters."
