Russian authorities stepped up pressure on oil major YUKOS on Tuesday, accusing it of illegally dodging over $3 billion in tax, a move analysts said could make it difficult for Russia’s top oil firm to survive in its current form.
After months of pursuing YUKOS’s main owners -- and jailing two of them -- this is the first time the state has directly accused the company itself of breaking the law.
The tax ministry said in a statement it had handed an investigation report to YUKOS on Monday in which it accused the firm of actively using illegal tax evasion schemes in 2000 to underpay 98 billion roubles ($3.33 billion).
YUKOS has been under relentless pressure since key shareholder Mikhail Khodorkovsky, Russia’s richest man, was arrested in October on massive fraud and tax evasion charges.
Analysts believe the attacks on Khodorkovsky and YUKOS were backed by Kremlin hardliners who wanted to rein in the billionaire’s political ambitions and send a warning to fellow tycoons to also keep their noses out of politics.
YUKOS said in a statement on Tuesday it had paid the highest tax bill among Russian oil majors in the year 2000. It denied it had used illegal schemes to reduce the tax burden and promised to defend its tax payment record in court.
The $3.33 billion tax claim for 2000 is almost the same as YUKOS’s net profit in 2002.
Shares of YUKOS Tuesday fell 1.45 percent to 310.2 roubles on the MICEX exchange and were down three percent to $10.47 on the dollar-denominated RTS bourse.
Survival outlook
Analysts said the latest charge was not likely to be the last and questioned whether Russia’s biggest oil firm would be able to survive with all its assets.
Aton brokerage said the move was not unexpected after the tax ministry sent a letter to prosecutors earlier this month saying that YUKOS might owe up to 150 billion roubles.
“Yet, the fact that the 98 billion roubles tax claim is for just one year out of the six reportedly covered by investigations suggests that the 150 billion roubles total claim figure may increase further in the coming year,” said Aton.
Alfa Bank also noted the heightened pressure on the company but said YUKOS’s tax rate did not differ significantly from some of its peers.
“This can be viewed as continued pressure on the company in order to push out its core shareholders, which we feel is the government’s main goal,” the bank said in a research note.
According to Alfa calculations, YUKOS’s total revenue for 2000 was $9 billion, on which it paid taxes totalling $1.9 billion, representing a 21 percent tax burden on revenues, only slightly below the 23 percent average for Russian oil majors.
Brunswick UBS has said fellow Sibneft’s effective tax rate was even lower than that of YUKOS in 1999-2003.
YUKOS agreed in April to buy Sibneft in a complex $11 billion cash and equity deal, but Sibneft moved to undo the agreement last month following the arrest of Khodorkovsky.
YUKOS, which currently owns 92 percent of Sibneft, said it was ready to start de-merger talks, but wanted first to complete all merger formalities before signing a break-up deal.
This included a Sibneft extraordinary meeting on Tuesday, which was set months ago, as the last formality, and had been designed to elect YUKOS representatives to the board of Sibneft.
Sibneft, which controls 26 percent of YUKOS under the merger deal, said earlier this month that YUKOS was late in proposing candidates and the meeting would re-elect the old board.
But on Tuesday, YUKOS prevented the meeting from taking place in a move further complicating the divorce.
“The meeting did not take place. YUKOS’s people did not show up at the meeting,” said a Sibneft official. The failure of YUKOS representatives to attend meant there was no quorum.
A YUKOS spokesman said the company was now looking to call a new extraordinary shareholders meeting of Sibneft to have the majority of its representatives at Sibneft’s board.
Analysts said the move showed that the two firms had far to go before reversing their deal. “This suggests that the divorce procedure may be drawn out and require more complex negotiations,” said Aton brokerage.