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Bailiffs set to pounce on Yukos

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Interior ministry officers seal offices inside the Yukos headquarters.

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Mikhail Khodorkovsky

MOSCOW, Russia (CNN) -- Russia's biggest oil firm Yukos is staring financial ruin in the face after it failed to meet a $3.4 billion tax bill deadline.

The deadline expired at midnight (2000 GMT) and bailiffs could move in Thursday morning to seize assets.

Shares in Yukos jumped over 13 percent on Wednesday on hopes for a last minute deal to save the company, after former CEO Mikhail Khodorkovsky -- currently in jail -- offered to surrender his 40 percent stake in the oil firm.

But the eleventh hour talks with the government proved fruitless and the company admitted it would not be able to pay the demand.

Interfax news agency reported that Russia's Federal Court Bailiff's Service was enforcing a court order against Yukos in connection with the tax demands for 2000.

Asked whether any bailiffs were currently on Yukos property, a senior Yukos official said he had no knowledge of that.

"It's a very, very tense situation right now," said CNN's Dougherty on Wednesday. "This is a fight to the finish, it's unclear who's going to blink."

Khodorkovsky, along with other key shareholders, owns a 44 percent stake in Yukos.

The company's immediate future depends to a large extent on whether the core owners can reach any settlement with the Kremlin.

Khodorkovsky is on trial with Platon Lebedev facing 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.

President Vladimir Putin pledged last month officials would do all they could to avoid the firm's collapse. The company has over 100,000 employees and pumps around 20 percent of Russia's oil.

But they have continued to land legal blows against the firm whilst Yuko's tax bill has ballooned with a second claim for 2001 and promises of further claims for 2002 and 2003.

The Paris-based Organization for Economic Cooperation and Development on Wednesday criticized Russia's handling of the Yukos case, saying the legal action represented "highly selective law enforcement," Reuters reported

Russia's deputy finance minister had indicated the government and Yukos could reach an agreement to restructure the tax bill for 2000.

But the Russian prosecutor general has said 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 on Tuesday.

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.

CNN Moscow Bureau Chief Jill Dougherty contributed to this report.

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