Gazprom scrambles for Yukos funds

Russia's Gazprom, the company hand-picked by the Kremlin to deliver the knockout blow to the oil giant Yukos by buying its largest production unit in a forced sale, was scrabbling to raise the necessary funds last night after a consortium of Western banks took fright and froze a $10bn (£5.1bn) credit line.

Russia's Gazprom, the company hand-picked by the Kremlin to deliver the knockout blow to the oil giant Yukos by buying its largest production unit in a forced sale, was scrabbling to raise the necessary funds last night after a consortium of Western banks took fright and froze a $10bn (£5.1bn) credit line.

The dramatic move came just two days before the crunch auction tomorrow. Gazprom has long been lined up to snaffle Yuganskneftegaz, a unit which produces 60 per cent of Yukos' oil, for a price of around $9bn (£4.6bn), despite the fact that most analysts believe it is worth almost double that.

Yukos has fought fiercely to prevent the sell-off, and in a surprise development late on Thursday succeeded in asking an American court to issue a 10-day restraining order on all the declared bidders in Sunday's auction, as well as on the banks who have promised to lend them funds.

Russian and Western sources reported last night that the banking consortium which had originally agreed to help Gazprom buy Yuganskneftegaz, and which is led by Deutsche Bank, had decided to put the financing deal on ice for the time being for fear of being prosecuted in the United States. "None of the banks want to jeopardise their US business, that is why they won't do anything as long as the injunction is in place," said one source. The other banks include ABN AMRO, BNP Paribas, Calyon, Dresdner Kleinwort Wasserstein and JP Morgan.

Some banking sources suggested that Deutsche Bank might decide to appeal the US ruling. However Gazprom itself, which is 39 per cent owned by the Russian government, said it was not backing out and was "continuing to work" to raise funds. In a sign of its intent, a spokesman said the company had already laid down a $1.77bn (£911m) deposit required to participate in Sunday's auction.

Most analysts believe Gazprom will manage to raise the necessary funds from a Russian source and that the Russian government will give it considerable leeway in terms of payment deadlines. Brokerage United Financial Group predicted yesterday that Gazprom would turn to state banks Sberbank and Vneshtorgbank or put in a joint bid for Yuganskneftegaz with its cash-rich rival Surgut. Either way, Gazprom is expected to prevail.

The Russian government itself was clearly irritated by the American court ruling. Foreign minister Sergei Lavrov told a news conference the affair would "evolve in compliance with Russian laws", and claimed that "someone wanted tensions to escalate and the investment climate in Russia to be brought into question". Russian prime minister Mikhail Fradkov also waded in, calling the Yukos case an internal matter and urging Western banks to ignore the US ruling. "We are being guided by our internal legislation, which is definitive," he said. "This ought to be considered by Western companies and banks."

Sunday's sale is designed to help pay off a back tax bill of some $27bn (£13.8bn). Yukos' jailed majority shareholder, Mikhail Khodorkovsky, claims to be the victim of a political witch hunt. Yesterday's developments came as Russian prosecutors detained the head of Yukos' personnel department for questioning and indicted the deputy head of the company's legal department for embezzlement.