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Russia pressures Yukos on licenses

IRKUTSK, Russia - Russia turned up the pressure on beleaguered oil major Yukos on Wednesday, threatening to strip it of a key oil production license, a move that could force it out of business.

Resources Minister Yuri Trutnev told reporters that licenses held by Yukos's West Siberian operator, Yuganskneftegaz, could be withdrawn within two weeks and awarded to another operator.

He said a handover of Yugansk, which produces 1 million barrels of crude per day, equivalent to about half of the Gulf oil state of Kuwait's daily output, could be carried out smoothly without any disruption to Russia's oil production.

"Any decision to revoke the license will cause no harm to the Russian economy, nor will there be any negative consequences in terms of lost oil production," he said. "For example there could be a transfer of management."

Trutnev's remarks confirmed comments last Friday by Resources Ministry officials, who said Yugansk could be stripped of its production licenses after running up tax arrears of 3.55 billion rubles ($121.5 million).

The threat to strip out Yugansk -- which pumps over 60 percent of Yukos's 1.7 million barrels per day in output -- comes as the unit is being valued for sale by investment bank Dresdner Kleinwort Wasserstein.

Bailiffs want to put Yugansk on the block to recover tax debts owed by Yukos which have reached $7 billion for 2000 and 2001. Yukos says that, with its bank accounts and assets frozen, it cannot pay the tax bill.
The end of Yukos?

The seizure of Yugansk would signal the destruction of Yukos, whose jailed founder and former chief executive Mikhail Khodorkovsky is on trial for tax evasion in what analysts see as Kremlin retribution for pursuing political ambitions.

Wednesday's move appeared to be a final warning to a group of core shareholders in Yukos, including Khodorkovsky, to surrender control or face the complete dismemberment of the company he created.

Khodorkovsky and his associates control 54 percent of Yukos through an investment vehicle called Menatep.

"It is being made palpably clear to Menatep that there is no point in fighting," said Adam Landes, an oil and gas analyst with Renaissance Capital in London.

Others said that the government was not making an idle threat and that Yukos was likely to be stripped of its most prized production license if Menatep did not surrender its Yukos shares.

"It is increasing the pressure and eventually the company is going to crack," said Stephen O'Sullivan, a strategist at UFG in Moscow.

"I assume they (Menatep) are not willing to give in and Khodorkovsky wants to show that the authorities have destroyed the business for no other reason than to get him," he said.
If the Yugansk license is revoked it could be awarded to another operator, such as state oil company Rosneft, on a temporary basis before being auctioned off to the highest bidder, said analysts.

"Rosneft could be chosen as license operator and it (Yugansk) may then be auctioned off later," said Stephen Dashevsky, an analyst at Aton brokerage.

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