Yukos ordered to halt oil sales

[Rudey]

This is just plain ridiculous. I wonder how this will affect your gas prices

http://www.nytimes.com/reuters/busin...-yukos.html?hp

Yukos Ordered to Halt Oil Sales; Crude Prices Jump
By REUTERS

Published: July 28, 2004


Filed at 10:17 a.m. ET

MOSCOW (Reuters) - Court officers told YUKOS on Wednesday to halt oil sales, bringing the collapse of Russia's largest oil firm a step nearer and pushing crude prices near 21-year highs.

Orders sent to YUKOS' production units bar sales of property, which under Russian law applies to their 1.7 million barrels a day in oil sales, according to justice officials.

But YUKOS said it had not complied, and was continuing to operate while it seeks clarification of what CEO Steven Theede called a ``misinterpretation.''

``It does not seem logical to me for the bailiffs to take action to immediately stop production,'' Theede told reporters on a trip to YUKOS' production facilities in Siberia.

It was not clear whether the order might force YUKOS to halt shipments of oil or simply bar the company from signing new supply contracts. Oil brokers said Baltic and Black Sea loadings of YUKOS crude were going ahead normally.

YUKOS pumps around 20 percent of the crude supply in Russia, the world's second-biggest oil exporter after Saudi Arabia, and if its sales stop, the company could fold quickly.

``This doesn't give YUKOS long, because all of a sudden new cash flows stop coming in,'' said Stephen O'Sullivan, oil analyst at brokerage UFG. ``It will bring matters to a head very quickly.

YUKOS shares slumped by 24 percent, resuming falls after a one-hour suspension to hit their lowest since May 2001.

They have been in free fall since the court officers said last week they would sell core unit Yuganskneftegaz, which accounts for over 60 percent of YUKOS' output, to recover a $3.4 billion tax debt for 2000.

U.S. light crude futures rose 52 cents to $42.36 a barrel, nine cents below June's 21-year high. ``We're going up on the back of the YUKOS news,'' one dealer said.

DESTROYING AN EMPIRE

The order to halt sales marked another turn of the screw in a year-long campaign against YUKOS and its politically ambitious former CEO Mikhail Khodorkovsky, who is on trial for fraud and tax evasion.

In unusually blunt language, senior European Union official Eneko Landaburu on Tuesday denounced the campaign as a drive by President Vladimir Putin ``to destroy an economic empire.''

Bailiffs sent letters this week to Yuganskneftegaz and smaller YUKOS units Samaraneftegaz and Tomskneftegaz.

``I demand ... an immediate halt, from the moment of receiving this order, to any activities directed at selling or changing the status of the property of Yuganskneftegaz,'' read one.

YUKOS has written to the authorities questioning the order's legal justification and warning that, if implemented, 15,000 workers could lose their jobs.

Earlier, Theede said a freeze on YUKOS' bank accounts could soon affect rail shipments of oil, which account for up to a quarter of the company's total sales.

``We've paid pipeline tariffs through August, rail through the first week of August. If we don't get access to the accounts the rail shipments will be affected,'' Theede said.

Justice Minister Yuri Chaika, in charge of Russia's bailiffs service, dismissed the warning and said YUKOS' workers would be paid. ``I declare officially that there will be no problems,'' he told reporters.

Chaika said a valuation of Yuganskneftegaz would be ready soon, but declined to say when a sale might take place.

ROSNEFT IN POSITION

State-owned oil company Rosneft emerged as a likely bidder for YUKOS assets after Igor Sechin, deputy head of Putin's staff and a long-time confidant, was elected its chairman on Tuesday.

-Rudey