Russian oil giant Yukos on Wednesday increased the stakes in its battle with the Kremlin when it filed for bankruptcy in the United States in an unusual move possibly intended to pitch Washington against Moscow.
The world’s second-largest oil producer filed for Chapter 11 protection in Houston, Texas, the home state of US President George Bush, despite Yukos having few assets in the US.
A US bankruptcy judge scheduled a session for later on Thursday to hear arguments in the bankruptcy filing and decide whether the court should issue a temporary restraining order blocking the planned sale of a part of the business responsible for 60% of its output.
Some industry experts believe Yukos is deliberately trying to win American political — as well as legal — backing just four days before state bailiffs in Russia sell off its main production unit to settle a $28-billion tax debt.
The move comes at a time when relations between Bush and his Russian counterpart, Vladimir Putin, are strained over the controversial election results in Ukraine.
On Wednesday, the newly formed Yukos Minority Shareholder Coalition, based in New York but backed by Russian Yukos investor Menatep, took out full-page newspaper advertisements calling on investors to oppose this weekend’s auction.
Yukos, whose pursuit by Russian prosecutors has caused havoc on the Russian stock exchange, demanded an injunction in Texas to halt the planned sale of the division Yuganskneftegaz.
It was unclear whether Chapter 11, a far-reaching provision designed to protect companies during bankruptcy, would affect the planned auction. Yukos claims it requires Chapter 11 protection as the auction will leave it with no option but to file for bankruptcy, as then it will be unable to pay off what remains of the $27,8-billion in disputed tax claims. The judge will first need to decide whether the US court has jurisdiction in the case.
A Yukos spokesperson said: ”The general feeling is that Yukos has not had a fair and equitable dealing in the Russian courts and we have to do all we can to protect the shareholders, the assets and the staff.”
She said US jurisdiction is recognised in this case by ”international law” but did not go into specifics, beyond referring to the court complaint.
The injunction, filed with the US bankruptcy court for the Southern District of Texas, said: ”If the auction is consummated, Yukos will be permanently, severely and irreparably damaged.”
The filing added that the auction ”will not be conducted in a commercially reasonable fashion”.
In order for US courts to have jurisdiction, Yukos will have to prove that it has a ”nexus” in the state of Texas — that a crucial part of its business is located there.
A source in Moscow’s arbitration court told Interfax that international law bars foreign courts from hearing a case until it has been heard domestically.
Directors quit
Meanwhile, three Yukos directors resigned on Wednesday. Sarah Carey, Raj Gupta and Jacques Kosciusko said the government’s planned auction means it is ”misleading” to shareholders for them to continue acting as if they were independent management.
The Russian Micex stock exchange suspended trading in Yukos shares when the stock fell more than 10% on the news. Shares, worth $16 before the arrest of Yukos chief executive Mikhail Khodorkovsky in October 2003, are now worth less than $1.
Analysts believe the Kremlin wants to sell off Yuganskneftegaz to loyal gas giant Gazprom in order to create a state energy giant. The Russian gas company has raised a record loan from a consortium of six Western banks to meet the expected starting price of about $8,6-billion for the firm.
The price is lower than the most conservative estimate given to the Kremlin of the firm’s worth by Western banks.
As most of the banks that are funding the Gazprom bid are subject to US regulators, a legal challenge there could jeopardise their investment.
Russian legal expert Alexander Dobrovinsky said the court action was filed ”so [Yukos shareholders] can pursue any purchaser that has assets in the US”, and so that Gazprom’s backers might take fright at possible legal challenges in the American courts.
Fadel Gheit, a respected oil analyst with Oppenheimer & Co brokerage in New York, said he could not recall seeing a foreign firm initially filing for bankruptcy in the US where it had few assets.
”I think they are clearly trying to take advantage of discord between the Kremlin and White House over the Ukrainian elections, though I don’t think the Kremlin will blink,” he argued.
Michael Hunter of the Yukos Minority Shareholder Coalition said he has support from Menatep and other big international investors.
”The idea is to make known what options there are to defend their rights.” — Guardian Unlimited Â