Tax Claims Push Russneft Into the Red

VedomostiThe Arctic port of Murmansk, seen here, may receive $10 billion for expansion, including for coal, container and oil terminals with connecting roads. Rosneft and Russian Railways are among shareholders of the planned hub.
Embattled oil firm Russneft said Tuesday that it moved to a loss last year after it was hit with back tax claims and fines.

The midsized oil producer said its loss, calculated under Russian accounting standards, amounted to 12.25 billion rubles ($521.3 million) in 2007, compared with a net profit of 9.94 billion rubles in 2006.

Unlike some other oil firms in the country, Russneft does not report results to international financial reporting standards, and the results according to Russian standards therefore serve as the only guide to its financial performance.

The firm said its profits turned negative in the fourth quarter of 2007 when, despite record high oil prices, the loss totaled 16.73 billion rubles versus a profit of 703.35 million in the same period the previous year.

The company said the fourth-quarter results were hampered by back tax claims and fines from the Federal Tax Service for the years 2003-2005. Russneft faces more than $800 million in back tax claims.

A Russian court froze Russneft's shares this year and issued a warrant for the arrest of its former head, billionaire Mikhail Gutseriyev, who has accused the state of bullying and using tax evasion charges to force him out of business.

Gutseriyev agreed last year to sell Russneft to Basic Element, the investment vehicle of Kremlin-friendly billionaire Oleg Deripaska, but the deal, bogged down in legal complications, has yet to be completed.

Switzerland-based commodities trader Glencore, which already owns stakes in some of Russneft's production units, also filed a request with the Federal Anti-Monopoly Service last year to buy the firm.

The anti-monopoly service has said it will make a final decision on both bids after all the court proceedings on the tax claims have ended.