Cash flows for Yukos but asset sale looms

Published on Friday 6 August 2004 12:43

YUKOS, the embattled Russian oil giant, has been given back access to its bank accounts, which had been frozen by the country’s government about four weeks ago.

The company had argued that it needed access to its cash reserves to keep it afloat and pay staff - as well as help repay its near 2 billion debt from 2000.

Russia’s Justice Ministry told Yukos it could use its accounts to make monthly payments to cover current operations "as the accounts of Yukos in credit organisations are not blocked".

Yukos’ chief financial officer Bruce Misamore welcomed the decision,

which would allow it to make uninterrupted payments of current taxes and payments on its outstanding tax bill, and to "continue financing production activities".

"This, no doubt, is good news for our several hundred thousand workers and their family members," he said.

Late last month, chief executive Steven Theede - who is now in charge of the firm - said restricted access to cash meant that Yukos, Russia’s biggest oil exporter, might be unable to fund its operating expenses and pay bills in the first half of August. Former chief executive and Yukos founder Mikhail Khodorkovsky is standing trial for fraud and tax evasion.

But many of the Kremlin’s critics have accused the Russian government of simply trying to put a spoke in the wheel of Mr Khodorkovsky’s political ambitions.

However, unfreezing the accounts would not stave off a sales of the firm’s assets, analysts said.

"The decision does much to alleviate remaining fears that Yukos’ oil production would be halted and that Russian oil exports would decline as a result," analysts at brokerage Aton said.

"However, it does not enable Yukos to pay the 2000 tax bill, and authorities are continuing to evaluate the company’s assets and probe the tax situation for 2001/02."

But analysts have also said that while the Justice Ministry’s decision was positive for Yukos’ operations, it would also make it hard for the company to file for bankruptcy.

Troika Dialog brokerage said: "[The decision] is the second strong sign that the government is not interested in seeing production and export disruptions at Yukos. At the same time, we believe that the change will not allow Yukos to file for bankruptcy, which, if it happens, will delay the asset sale process.

"We do not believe that the government’s stance on the company has softened in terms of delaying asset sales and view the development as neutral."