Russia plans to sell oil major Yukos' main operating unit, the justice ministry said on Tuesday, launching a much-feared move that would rip the heart out of a company pumping a fifth of the country's oil.
The threat of a fire sale of assets has hung over Yukos since it last month failed to pay $3.4 billion in back taxes for 2000, but bailiffs had been expected to spare core subsidiary Yuganskneftegaz. "After valuation, the share stake in Yuganskneftegaz will be handed over to a special organization for sale," the justice ministry said in a statement.
Analysts said the worst-case scenario was coming true for Yukos, now apparently destined for dismemberment as its main shareholder and former CEO Mikhail Khodorkovsky undergoes trial on charges of tax evasion and fraud.
"It's like performing a heart transplant on a man with a cough," said Maxim Shein, an analyst at BrokerCreditService.
"The sale of Yugansk will destroy the integrity of the company and its operations."
Yukos's shares fell 12 percent on the news and their trade was suspended on Moscow's MICEX exchange for an hour. The broader market shed three percent. "It seems excessive. They've gone right to the heart of Yukos — it almost seems like a preemptive strike to destroy the company," said Stephen O'Sullivan, co-head of research at UFG.
Knock-down sale
Yukos said it expected wholly-owned Yugansk to be sold by July 30 to a designated buyer for $1.75 billion, even though an independent audit it had commissioned valued the unit at over $30 billion.
Analysts put a firesale auction price of $12 billion on Yugansk, which pumps over a million barrels of west Siberian oil a day — 60 percent of Yukos' entire production.
"The government has virtually complete control over the auction/sale process," said Paul Collison at Brunswick UBS, tipping Surgutneftegaz, which has close Kremlin ties, and state-owned gas giant Gazprom as likely buyers.
But Russia's State Property Fund said it would not be possible to conduct a quick sale, saying it had not yet received any official instructions to do so.
"From today it could take no less than a month," the fund's spokesman Vladimir Zelentsov said.
Yukos has said it could be bankrupted by a total tax bill which has swollen to nearly $7 billion for 2000 and 2001, and is expected to top $10 billion after audits of 2002 and 2003.
Retribution
It has taken just a year to turn Yukos from Russia's leading listed company into spoils ripe for the picking, with Khodorkovsky paying a huge price for daring to oppose President Vladimir Putin.
Khodorkovsky, arrested last October, is on trial with partner Platon Lebedev for fraud and tax evasion and both could go to jail for 10 years if convicted.
Prosecutors on Tuesday began what is set to be a lengthy presentation of their case, after the defendants' denunciation of the trial last week as politically motivated.
