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. Last Updated: 07/27/2016

Yukos-Sibneft Divorce Could Get Messy

VedomostiYukos CEO Simon Kukes talking with a subordinate at a news conference on Wednesday.
Yukos said Wednesday it would not demand a $1 billion breakup fee from estranged merger partner Sibneft, but signaled hard bargaining to come as they head for a messy divorce.

In a sign relations between the two firms were descending into acrimony, Sibneft said it was rebuffing an attempt by Yukos to install its representatives on the Sibneft board and would manage its affairs independently from Jan. 1. Yukos vice president Yury Beilin told a news conference that negotiations had been held with Millhouse, the management company of Sibneft's main shareholder Roman Abramovich, but no legal document to end the merger had yet been signed.

"Last week there were preliminary negotiations with Millhouse, where we discussed ways of doing a reverse deal," said Beilin, a key player in the talks. "No legal documents were signed."

He also said Yukos still considered it owned a 92 percent share of Sibneft. "Sibneft is now a full-scale asset of the Yukos oil company," Beilin told the news conference.

Both parties were discussing a new agreement to wind up the merger, and payment of a $1 billion breakup fee would have no part in it, he added.

"The $1 billion concerned the other deal, which is completed," said Beilin. "Now we are discussing a new deal, and $1 billion has not been made a condition of the new deal, because there is not a deal yet."

But in a further twist, Beilin said Yukos main shareholders now believed $3 billion they handed over for Sibneft shares should be repaid with interest as part of a divorce settlement.

"The news is contradictory. They initially say 'peace' and then they seem to be saying 'no peace.' From what I can see, they are talking about war. This is negative for the company and Yukos is suffering," said Oleg Martynenko, a trader at Alfa Bank.

Yukos charity Open Russia said Wednesday that authorities are attempting to isolate it by conducting tax checks on all social organizations it has funded.

Open Russia says it donates about $100 million per year to charitable and social programs in addition to $100 million spent by Yukos itself, and spokesman Maxim Dbar said the tax checks could put this at risk.

The Tax Ministry was not available to comment, but human rights group Memorial described the demands as unprecedented. "This is the first time I have seen the tax inspectorate paying such attention to one of our partners," said acting Memorial director Yelena Zhemkova, adding that Open Russia's grant went toward a prize for schoolchildren.

Open Russia said it also has funded the VTsIOM polling agency, the Komsomolskaya Pravda newspaper and the Ekspertiza think tank.