Straw warns Putin Yukos crisis may scare off investors

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The Independent Online

Jack Straw, the Foreign Secretary, yesterday warned the Kremlin not to ruin the country's investment climate by being too heavy-handed with the beleaguered oil giant Yukos.

Jack Straw, the Foreign Secretary, yesterday warned the Kremlin not to ruin the country's investment climate by being too heavy-handed with the beleaguered oil giant Yukos.

In Moscow for a two-day working visit, Mr Straw's comments came as the clock ticked towards a crunch midnight deadline for payment of a $3.4bn tax bill which Yukos cannot pay as the company stared bankruptcy in the face.

Mr Straw made it clear the UK was watching events closely and although he conceded the drama was "an internal matter", he used diplomatic code to stress that the Government has serious concerns about the way in which Yukos and Mikhail Khodorkovsky, its former chief executive, are being treated.

"Britain is the largest single investor in the Russian Federation," he told reporters at a briefing with his Russian counterpart Sergei Lavrov. "(And) I know that Mr Lavrov and the Russian government appreciate the need for stability and predictability so that investment can flourish. The matter is being monitored carefully by the British Embassy here because a number of Yukos' creditors are British."

His comments came during a day of high drama as Yukos first denied and then confirmed that Mr Khodorkovsky, Russia's richest man, was ready to compromise with the authorities and offer to surrender part of his massive stake in the firm to help it pay the crippling tax bill.

The non-payment of the bill threatened to pull the plug on Russia's largest domestic oil producer and cause untold damage to Russia's investment climate. Yukos sources admitted before Mr Khodorkovsky's announcement that the company has only raised $1.4bn in cash and that bankruptcy looked "pretty close".

"Unless the government gives us more time to pay back what we owe... we will be, technically speaking, insolvent," Hugo Erikssen, the head of international information for Yukos, said. The company's ability to raise funds has been frustrated by the fact that its assets and bank accounts have been frozen as part of an investigation into its fiscal liabilities and that itsformer chief executive is in jail facing charges of fraud and embezzlement.

Most Western observers believe the charges are Kremlin-inspired and designed to punish the Mr Khodorkovsky for his growing interest in opposition politics.

Mr Khodorkovsky left it to the last minute to hang out an olive branch. His offer was made from his Moscow cell via his lawyer less than five hours before the deadline for payment elapsed. By that time investigators were already rummaging through the company's share certificates, trying to work out who owned what and bailiffs had announced it was time to collect.

There was no immediate response from the authorities to Mr Khodorkovsky's offer. Serious attempts to collect the $3.4bn are expected to begin today.

Mr Khodorkovsky and his associates own 44 per cent of Yukos' shares and his lawyer, Anton Drel, said he had taken the decision to surrender some of them in order "to prevent the company's bankruptcy and to prevent damage to the interests of all the workers and shareholders of the company."

Buoyed by speculation that Mr Khodorkovsky would offer to part with some of his equity before the deadline passed, Yukos shares closed 13 per cent higher on Moscow's Micex exchange.

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