Court Freezes Yukos Asset Sales

ReutersLithuania's Mazeikiu Nafta is the sole oil refinery in the Baltic states.
A Russian court has imposed a ban on the sale of Yukos assets as part of bankruptcy proceedings, a decision that could complicate the stricken oil company's attempts to sell its stake in Lithuania's Mazeikiu refinery and stave off liquidation.

Yukos is required to obtain permission from its court-appointed external manager to sell any assets, including non-Russian ones, if their value exceeds 30 million rubles ($1.1 million), the Moscow Arbitration Court ruled Wednesday, Interfax reported, citing court documents.

The Lithuanian government -- under immense political pressure to prevent Russia taking over the country's major contributor to gross domestic product, a possible outcome if Yukos goes bankrupt and state-owned Rosneft snaps up its remaining assets -- said it would continue talks and would even consider pushing through the refinery's renationalization if negotiations failed.

Andrew Smith, a London-based spokesman for Yukos, said Thursday that the company was not ready to comment on any specific issues that might result from the assets sale ban. "We have been battling in the Russian court system for the past three years, and our expectations are not too high. This is another travesty of justice. We feel that the Russian government plans to destroy Yukos," Smith said by telephone.

Yukos has been in talks with the Lithuanian government over the sale of its 53.7 percent stake in the Baltic state's Mazeikiu refinery, proceeds from which will be used to pay off part of its outstanding debts, but so far it has failed to clinch a deal. Yukos' stake is estimated to be worth around $1 billion.

Yukos CEO Steven Theede was expected to arrive in Vilnius late Thursday for negotiations with the Lithuanian government, sources in the company said, Interfax reported.

Yukos holds its Mazeikiu shares through Dutch-registered subsidiary Yukos International U.K. The government will continue talks and is consulting Dutch lawyers to confirm that the Moscow court's decision will not affect its purchase of Yukos shares, Lithuanian Prime Minister Algirdas Brazauskas told the parliament Thursday, news portal Delfi.lt reported. Lithuania was ready to sign a deal with Theede as soon as Friday, Brazauskas said.

The Moscow court's ruling is valid only on Russian territory, and in order for it to be enforced in the Mazeikiu case, a Dutch court would have to approve the freezing of all Yukos asset sales, said Irmantas Norkus, head of Lithuanian law firm Norkus&Partners, Interfax reported Thursday.

With prolonged talks with Yukos bearing no fruit, the Lithuanian government has grown increasingly frustrated with Yukos' management and has openly voiced irritation over its internal squabbles and inability to formulate a clear position.

If the two parties fail to reach a deal, Lithuania will consider renationalizing Mazeikiu, Brazauskas said. "If matters don't improve, the government will submit to the parliament a bill on Mazeikiu's nationalization," Brazauskas said, Delfi.lt reported.

On March 23, the team of negotiators representing the Lithuanian government sent to Yukos all sale-agreement documents, Brazauskas said. Newspaper Lietuvos Rytas had previously reported that Lithuania was ready to pay $1.4 billion for Yukos shares. After not receiving a response, the government this week sent several letters to the oil firm's management, even threatening to take it to court, Brazauskas said, Delfi.lt reported.

Mazeikiu is on the list of Lithuania's strategic assets. Controversy surrounding the refinery's sale in 1999 to U.S. investor Williams International, which was competing against LUKoil, led to several Cabinet resignations, highlighting the importance Mazeikiu plays in Lithuania's energy security.

Repeated phone calls to Saulius Specius, a lead Lithuanian negotiator, and Nerijus Eidukevicius, Lithuanian deputy economy minister, went unanswered on Thursday.

Lithuania owns 41 percent in the refinery and plans to sell an amassed majority stake to another foreign investor. LUKoil, TNK-BP, Poland's PKN-BP and Kazakhstan's KazMunaiGaz are competing in the race.

Yukos on March 28 was placed under temporary external supervision by a Moscow court following a suit brought on March 10 by a syndicate of foreign banks over $482 million outstanding on a $1 billion loan.Days after the filing of the suit, Yukos said Rosneft had bought the debt from the banks under a December 2005 agreement.

Yukos has been crushed under multibillion-dollar back tax claims and still faces some $10 billion in back taxes and penalties.

Staff Writer Valeria Korchagina contributed to this report.