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Russia's Yukos Oil Company Still Hopes to Avoid Bankruptcy - 2004-06-30


Russia's major oil company, Yukos, says it will appeal a Moscow court ruling, late Tuesday, that it must pay a $3.4 billion tax bill that company executives say would force it to declare bankruptcy. The ruling is the latest twist in an ongoing legal battle that critics say is politically motivated.

Yukos issued a statement saying it would appeal the court ruling while, at the same time, "do its best" to pay the tax bill.

The carefully worded statement left open the possibility that some kind of out-of-court agreement might still be reached with Russia's tax ministry.

However, the latest court decision appeared to reflect the government line that Yukos has little choice but to pay the $3.4 billion bill.

It also opened the possibility the government might seize some assets of Yukos, within a matter of days.

Company officials have long said they cannot meet the government's demands, because most of its assets were frozen as part of a parallel case against the company's former director, Mikhail Khodorkovsky.

Mr. Khodorkovsky is on trial for tax evasion, in a case that is widely seen as retribution for the billionaire's attempt to challenge the Kremlin by funding opposition parties.

Both cases have long rattled Russia's financial markets and caused a dramatic fall in the company's stock price despite a recent statement from President Vladimir Putin that the government does not want to see Yukos go bankrupt.

His remarks raised hope that some kind of negotiated settlement could be reached.

Oil remains Russia's top export and Yukos has the largest share of that market.

Until charges against Mr. Khodorkovsky first surfaced a year ago, Yukos was considered among the most transparent of Russian companies to emerge in the emerging market economy of since the collapse of the Soviet Union.

Despite the financial fallout, the government's tough stand on the issue has proven popular among ordinary Russians.

Mr. Khodorkovsky is one of a handful of so-called "oligarchs," who amassed enormous fortunes a decade ago, through insider deals in which they took control of key assets, especially oil companies.

However, the case against the billionaire has provoked something of a backlash for the way it has been carried out.

Human rights groups have formed what they call a "civil commission" to monitor developments in the trial of Mr. Khodorkovsky and another top aide, which is to resume in two weeks. The commission includes several Kremlin critics who say the trial is primarily a political issue, that must be monitored.

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