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Russian Court Declares Yukos Oil Company Bankrupt

A bankruptcy court in Moscow has ruled that Yukos, once Russia's largest oil firm, should be liquidated because its debts are larger than its remaining assets. It was the end of a long, controversial affair that has shaken confidence in Russia's economic climate despite record-high oil prices.

The Russian public was told about the final end for Yukos in a brief item on television news programs, which stated that the once-mighty company had been declared bankrupt.

The Moscow court reached its decision after rejecting last-minute arguments from Yukos' lawyers.

A government-appointed administrator declared that Yukos has insufficient assets to cover debts he says are more than $18 billion, an assessment disputed by the oil firm's current directors.

The end was expected after a hearing last week in which creditors voted to liquidate what remains of Yukos.

It was the culmination of a nearly three-year battle that critics say is largely a political vendetta against former Yukos director Mikhail Khodorkovsky.

Once Russia's richest man, Khodorkovsky, 42, is now serving an eight-year sentence in a Siberian prison after his conviction for alleged tax evasion and fraud.

Supporters of the former billionaire say the charges were retribution for his funding of opposition parties and plans to build his own oil export pipeline, something that has always been a state monopoly.

The main creditor against the oil firm was Russia's tax service, whose claim of about $28 billion in back taxes started the process of dismembering Yukos last year.

In order to pay the bill the government auctioned off Yukos' primary oil pumping unit at a bargain price to a small company that quickly became one of Russia's largest entities, Rosneft.

During last week's liquidation hearing, current Yukos directors accused the government of employing the same strategy by undervaluing the company's remaining assets.

The directors took part in the hearing by video-link from London, fearing they would be arrested if they came to Russia.

President Putin has insisted that the case is only about fighting fraud and corruption.

But one defense lawyer, Robert Amsterdam, described what he saw happening after the verdict last year.

"What they are attempting to do is use the tax and criminal code in a way where it has become an instrumentality of evil, not of justice," he said. "Where search and seizure powers are being used not to obtain information to determine guilt, but rather to break down the neural systems of corporations, and effect the greatest hostile takeover of modern history."

Kremlin officials say Russia's extensive oil and gas assets are of "strategic" importance, and have placed restrictions on foreign investment in the energy sector.