Yukos fury as Russia plans cut-price sale

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Yukos Launched a furious attack on the Kremlin yesterday after the government made good on its threat to sell off the crisis-ridden company's main production unit to recover billions of dollars in back taxes - a process that means Russia's largest oil producer will soon cease to exist.

Bringing down the curtain on a corporate tragedy which has kept the markets guessing for months, the government said it would sell off the rump of Yuganskneftegaz, the crown in Yukos' tarnished crown, at auction on 19 December for $8.6bn (£4.6bn). Dresdner Kleinwort Wasserstein has valued Yuganskneftegaz at up to $21.1bn and analysts said yesterday the government-fixed price was absurdly low and amounted to daylight robbery.

Yukos shares dropped by more than 30 per cent in Moscow on the news, their lowest level since January 2001.

To make matters worse, Yukos was hit with a fresh tax bill for 2003 for $6bn, bringing its total fiscal liability to a massive $24bn. That means that the sale of Yuganskneftegaz, which pumps about 1 million barrels of oil a day, or 60 per cent of Yukos' total, will not cover its outstanding debts, making the piecemeal sale of other assets inevitable.

Steven Theede, the company's chief executive, said: "What we are witnessing is, simply put, a government organised theft to settle a political score," referring to the widely held belief that the government's persecution of Yukos was a way of getting at Mikhail Khodorkovsky, the group's largest shareholder. He angered President Vladimir Putin with his anti-establishment political views and is on trial for fraud and embezzlement, charges he fiercely denies.

Mr Theede said the sell-off was illegal under Russian law and made a mockery of the inviolability of private property in Russia. "Today's announcement is both stunning and expected," he said yesterday. "Stunning because it is such a bold demonstration of the contempt the government has for the rule of law. Expected because given the way this case has developed, the outcome was determined long ago."

Speaking from his cell Mr Khodorkovsky said the sale was "the worst solution" for the company, the state, minority shareholders and society as a whole.

Analysts say a Kremlin-friendly Russian firm was likely to be the buyer, with Gazprom and Surgutneftegaz considered the front-runners. Italy's ENI and Germany's Eon have also been mentioned.