Yukos top managers leave Russia fearing arrest

MOSCOW - The top management of oil major Yukos has left Russia fearing arrest under a Kremlin drive to "decapitate" the country's largest oil exporting company, a Yukos source said on Thursday.

The departure to London of Chief Executive Officer Steven Theede and Chief Financial Officer Bruce Misamore, both US citizens, leaves Yukos rudderless as it faces ruin under a US$25 billion ($35.59 billion) back tax demand.

"All top managers have left the country because of the atmosphere of fear and terror aimed at paralysing the company," the source told Reuters. "The company has been decapitated."

Yukos' Russian operational managers, Alexander Temerko, Mikhail Trushin and production chief Yuri Beilin have also left the country. Refining and marketing head Pyotr Zolotarev has resigned, the source said.

And middle management has been subjected to pressure by the authorities, included repeated house searches. "They come, often seize nothing, just trash flats and homes, and then walk away," the source said, on condition of anonymity.

The crippling tax demand is seen by many as the price former CEO Mikhail Khodorkovsky must pay for daring to pose a political challenge to President Vladimir Putin. Khodorkovsky and associate Platon Lebedev are on trial for fraud and tax evasion.

Khodorkovsky's other partners went into exile last year, following oligarchs like Vladimir Gusinsky and Boris Berezovsky who had quit Russia after surrendering their business empires.

Some analysts say Putin had to take on the oligarchs to stabilise Russia after their asset-grabs of the 1990s, but the effort has taken the government's eye off key economic reforms and shaken investor confidence.

To recover YUKOS' tax debt, the state will auction its main Siberian unit, Yuganskneftegaz, on December 19 at a starting price of US$8.65 billion.

Investors fear the state will sell more assets, including Yukos' two other oil units and five refineries, leaving zero value to minority shareholders who own 25 per cent of Yukos.

"It looks purely destructive and that's not how a government should act," said Mattias Westman, CEO of Prosperity Capital, which manages US$600 million and heads a minority shareholders' committee weighing legal action over the Yukos crisis.

William Browder, head of the US$1.6 billion Hermitage Capital fund, disagreed:

"The developments at Yukos are ugly for sure, but they aren't much different from the way Khodorkovsky treated minority shareholders when he was consolidating Yukos in the 1990s. Now it's just a different group of people abusing the law," he said.

Shares of Yukos, once Russia's biggest firm with a market capitalisation of over US$40 billion, fell by 26 per cent to below a dollar each. That is down 94 per cent from last year's peak and values Yukos at US$3 billion, less than forecast 2004 profits.

"The news leaves Yukos even more paralysed than before, as management was already struggling to run the company on a day-to-day basis amid a cash flow squeeze," said Aton analyst Steven Dashevsky.

Yukos' tax crisis has helped lift oil prices to historic highs on fears of supply disruptions from Russia, the world's Number 2 oil exporter. Yukos pumps 1.7 million barrels a day.

Spokesman Alexander Shadrin said Yukos head office was still working and the company was pumping regular volumes of crude.

Russian and UK newspapers said the general prosecutor's office had wanted to summon Misamore this week over an investigation into Yukos, but that he missed the meeting as he had already left for London.

London-based Yukos spokeswoman Claire Davidson said Misamore intended to return to Russia but would consult first with the US authorities.

"I'm not going to sacrifice my life for (Russia's) political purposes," Misamore told the Financial Times.

Prosecutors had no comment.

Analysts expect Yugansk to be sold to gas monopoly Gazprom or pro-Kremlin oil firm Surgutneftegaz.

Speculation has mounted that Gazprom is trying to persuade its biggest Western clients, German E.ON and Italy's ENI, into joining the auction.

E.ON said it may be interested in Yukos' gas units, but has no plans to bid in the upcoming Yugansk auction.

"Everything that is connected with Yukos is subject to considerable legal risks. So we would have to very carefully check whether we wanted to become involved," E.ON chief Wulf Bernotat told the Financial Times Deutschland.

- REUTERS