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. Last Updated: 07/27/2016

Russian Tax Service Opens $10M Case Against Texaco

The State Tax Service announced Friday that it had opened criminal proceedings against U.S. oil company Texaco Corp. for evading at least $10 million in taxes.

The tax service alleged in a press release that from 1992 to 1994 Texaco had failed to register properly an oil project in the Yamalo-Nenetsk district in Russia's Far North.

The statement said Texaco had also violated Russian tax law by underpaying "several kinds of taxes" and by making tax payments directly from U.S. territory rather than from a Russian entity. The tax service estimated that the government lost more than $10 million as a result of Texaco's actions.

Stanislav Naumov, an aide to tax service chief Alexander Pochinok, said the tax evasion related to transactions between Texaco and Russian oil company Noyabrskneftegaz while Texaco was operating on the Sutormin oil field, Interfax reported Friday.

He said Texaco's debt might include $6.4 million owed under the tax on "nonresidential legal entities" and $5.7 million in value-added and road taxes. The statement said the $10 million figure was only a minimum preliminary estimate.

U.S. tax officials were cooperating with the tax service and Russian customs officials in the investigation, which was opened by tax police in the Arctic Circle town of Muravlenko, Naumov said.

Interfax reported that Noyabrskneftegaz, part of Boris Berezovsky's Sibneft, had been forced to pay the taxes that should have been paid by the U.S. company.

Texaco officials were caught by surprise by the news of the tax service allegations, said Richard Freeman, chief of Texaco's office in Moscow.

Freeman said U.S.-based Texaco International Operations did participate in a one-year project rehabilitating idle oil wells in the region. But he said the work was finished in 1994, and the company paid all taxes that were due at the time.

"We did not make any profit out of it," he said. "But we paid all our taxes when due."

Freeman said he had not received any notification of the investigation, nor was it likely that Texaco International Operations had been officially notified.

Texaco is currently involved in the Sakhalin-3 offshore gas project in Russia's Far East, as well as in the Timan-Pechora projects, said Alexei Kukin, an oil analyst at MFK Renaissance. Both projects are to be developed under production-sharing agreements, which require approval from the Russian parliament.

Kukin said the investigation into Texaco may reflect the tax service's efforts to raise money to fill holes in the federal budget. But he also noted that companies that would like a stake in the Timan-Pechora region may stand to gain from Texaco's problems with the tax service.