Thursday, July 29, 2004

More news on the fiasco that is Yukos.
The top manager of Yukos Oil Co., Russia's largest oil producer, said Wednesday that the company was continuing production, despite news reports that drove up world oil prices by suggesting that the government had ordered it to turn off its pumps.

Steven M. Theede, Yukos's chief executive, called the situation a misunderstanding. Speaking with reporters traveling with him to tour some of the firm's Siberian facilities, Theede said that the company's production subsidiaries had received a government notice last week forbidding them to sell property and that Yukos's attorneys were trying to determine whether that included crude oil.

"We're just trying to get clarification," he said aboard a chartered jet returning to Moscow. "It's nothing new. We're continuing to produce."
On its face, this news is reassuring since the global economy doesn't take kindly to 2% of global crude production disappearing overnight. However, further on, gentle reader, one sees
The state has frozen Yukos's assets and bank accounts as part of its effort to collect on back-tax claims, which were generated by reopening past audits and reinterpreting tax shelter law to rule out practices that another state agency still considers legal. Unless the state grants the company access to its frozen bank accounts, Yukos will have to shut down production soon. The only question is when.

Theede said the first impact would be felt at the end of next week, when Yukos will no longer be able to pay for rail shipments of oil to China. With no rail service available, the company will be able to continue pumping here for a maximum of three days, until its storage facilities are full. That would effectively shut down about half of the production by the company's Tomskneft subsidiary here in the western Siberian region of Tomsk and about 25 percent of the company's overall production of 1.7 million barrels a day.

By the end of the second week in August, the company would no longer have money to pay for pipeline shipments, either, Theede said. At that point, the rest of production would begin shutting down.
Over at the BBC, however, folks claim to already see the end of the tunnel.
Beleaguered Russian giant Yukos can continue to produce and sell oil despite an earlier demand to stop output, according to Russian officials.

The Justice Ministry said writs barring property sales were not meant to stop Yukos pumping out oil, ending the confusion which pushed up oil prices.

Yukos is facing bankruptcy as courts try to enforce a $3.4bn tax debt.

The company, which pumps a fifth of Russia's crude output, said that operations were continuing as normal.

"The bailiffs' activities are aimed neither at blocking the bank accounts nor the economic activities of Yukos' subsidiaries," the Russian justice ministry spokesman said.
Down at the very bottom of the report, however, the BBC confirms the Washington Post's more dire analysis.
Yukos is still pumping, but oil supplies could still be affected within the next three weeks as its bank accounts are frozen, leaving the firm unable to pay pipeline and rail operators to transport its oil.
Looks like early August ought to be a hair-raising ride.

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