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Moscow Court Rules on Yukos Oil Tax Case - 2004-06-18

A Moscow court has upheld the Russian tax ministry's tax claim against the Yukos oil company that could force the firm into bankruptcy. The ruling is part of an ongoing legal battle that critics say is politically motivated.

The court upheld the government's claim that Russia's largest oil company owes $3.4 billion in back taxes. It rejected several appeals by Yukos seeking to postpone hearings on the case.

Yukos officials say the company could go bankrupt if it is forced to pay the tax bill all at once. Yukos lawyers argued the company could pay if given enough time and the authority to sell some of the company assets. But the assets were frozen by the government after the arrest last October of the former director of Yukos, Mikhail Khodorkovsky.

Mr. Khodorkovsky has been charged with tax evasion and embezzlement in a case that critics say was backed by the Kremlin and amounts to retaliation for his financial support for opponents of President Putin in the last parliamentary and presidential elections.

The former Yukos chief is one of Russia's richest men. He amassed a huge fortune a decade ago by taking control of formerly state-owned assets, especially oil companies. His trial opened two days ago.

Arkady Volsky, who is president of the Russian Union of Industrialists and Entrepreneurs, questions the government's motives in prosecuting Mr. Khodorkovsky.

He says half a year has gone by since Mr. Khodorkovsky's arrest and asks why is it that only now the Russian Tax Ministry has started talking about the tax problem? He says the bankruptcy of Yukos would be a disaster.

President Putin says politics have nothing to do with the Yukos case. He said Thursday that the government is not interested in seeing Yukos go into bankruptcy, but insisted the matter is one for the courts to decide.

The president's comments boosted Yukos shares on the Moscow stock market and raised hopes some kind of deal may be reached between Yukos and the Kremlin to save the company.