MOSCOW — Russian tax authorities Friday scheduled the equivalent of a fire sale at what was once the nation's largest oil company, offering the main production facility at Yukos Oil for auction next month at a fraction of its value.
Company officials called the planned auction terms for Yuganskneftegaz -- the crown jewel of Russian oil facilities, producing almost as much oil as Iraq -- a "stunning" announcement.
"What we are witnessing is, simply put, a government-organized theft to settle a political score," Yukos Chief Executive Steven Theede said in a statement.
The renationalization of Yukos through the sale of its assets to a state-controlled energy company is now considered one of the most likely outcomes. Analysts said major foreign players would be unlikely to bid on a key component of a company that was facing up to $20 billion in tax bills, thanks to the Kremlin's yearlong battle with Yukos and its former CEO, imprisoned billionaire Mikhail Khodorkovsky.
"Many believe at this point that the company is going to be destroyed as a signal to all the other oligarchs to get behind the Kremlin and don't make trouble," said James Fenker, head of research at Troika Dialog, a Moscow-based investment firm. "It's a very medieval signal. You take the criminal and you put his head on a stick outside the Kremlin."
Yuliya Latynina, an analyst with Echo of Moscow radio, said Yukos assets would probably go to a Kremlin-friendly company in a controlled auction -- an outcome that would support claims the government was more interested in acquiring Yukos' assets than punishing the company for alleged tax evasion.
"Now, for the civilized world, we look like Nigeria," Latynina said.
"Yukos is long dead," she said. The stock market took a similar view -- trading on Yukos was halted in midafternoon when the company's already depressed shares lost more than a quarter of their value.
Yuganskneftegaz produces more than 1 million barrels of oil a day for Yukos out of central Siberia; the investment bank Dresdner Kleinwort Wasserstein recently valued the unit at $14.7 billion to $17.3 billion. The starting price established by the federal property fund Friday for the Dec. 19 auction of 77% of the shares of the oil facility is $8.65 billion.
In their statement Friday, Yukos officials complained bitterly that the company was never given the chance to dispose of its assets to pay its disputed tax bills, which have mounted by the billions in recent weeks as tax authorities launch new raids and investigations.
They complained that the government edged the company toward bankruptcy by freezing the assets.
"The sale is clearly illegal under Russian law, which states that non-core assets are to be disposed of first in tax settlement cases," Theede said. "Yuganskneftegaz is the heart of Yukos, and its sale will lead to the destruction of the most efficient Russian company, and the one that has attracted the most Western investment."
In a statement through his lawyers, the imprisoned Khodorkovsky, who is facing trial on tax evasion and fraud charges, said the government had chosen "the worst possible way" to resolve the Yukos crisis.
"These actions are shifting all responsibility for work carried out by especially dangerous Yukos plants, supplies to regions, benefits to workers, etc., to the government," he said, adding that he hoped "that they strive to [uphold] this responsibility."
Yukos directors have scheduled a special shareholders meeting for Dec. 20 -- a day after the auction -- to discuss their next move, which could include declaring insolvency or bankruptcy, depending on the events of the next few weeks.
President Vladimir V. Putin has spent much of the week attempting to reassure business leaders and the international community that Russia remains open to private businesses and committed to democracy and private property.
In an interview with Chilean journalists made public Friday, the Russian leader said a return to a totalitarian system was "absolutely out of the question."
But at the same time, he said, "democracy cannot be interpreted as complete permissiveness. A free market cannot be interpreted as the right to rob the state and national riches. We will build democracy, not anarchy."
Putin emphasized that Russia had been able to maintain economic growth rates of 6% to 8% a year despite the Yukos situation that began with Khodorkovsky's arrest in October 2003.
"It seems to me that Russia currently occupies one of the leading positions in the world," he said. "But Russia's capabilities and potential are still not appreciated. In several months last year and this year, volumes of oil production in Russia were higher than Saudi Arabia."
Analysts said foreign oil companies might be reluctant to bid on Yukos assets because of the huge tax bill still looming, some of which might be assessed against Yuganskneftegaz's new owners.
Many predicted that the state-owned gas company, Gazprom, in connection with state-controlled Rosneft, would be the most likely bidders, along with Surgutneftegaz.
In any case, foreign interest in Russian oil sector investment remains substantial. With Yukos, Fenker said, at least the new rules of the game are becoming clear, and they may include state ownership of a large part of the oil and gas sectors. But that does not mean that other private oil companies are threatened, he said.
"OK, Yukos is going to collapse. But the value is going to go somewhere else," Fenker said. "No one is going to be silly enough to follow in Khodorkovsky's footsteps [of challenging the government]. He added that the Yukos case would make it clear to others "that in Russia, if the state in [a market of $50 per barrel of] oil, can bankrupt an oil company, you'd better not take on the state."