Business Analysis: Yukos chiefs scour the globe for legal means to halt its destruction

Shareholders in Russian oil giant put damages sought from Moscow at $20bn-plus

The legal quagmire surrounding the doomed Russian oil giant Yukos may come to a courtroom in London in the new year as its embittered shareholders and management try to recover damages conservatively estimated at $20bn (£10.3bn), the company indicated yesterday.

The legal quagmire surrounding the doomed Russian oil giant Yukos may come to a courtroom in London in the new year as its embittered shareholders and management try to recover damages conservatively estimated at $20bn (£10.3bn), the company indicated yesterday.

Yukos' American chief executive, Steven Theede, who has chosen to exile himself in London, said the company would look "at every legal redress" to claim compensation from the Russian state and from whoever inherits Yukos' assets.

Yukos shares have shed more than 95 per cent of their value, or more than $30bn, in the past year as the company, once Russia's biggest, has been hit by back tax bill after back tax bill and had its assets and bank accounts frozen.

Russian media sources reported yesterday that the company was considering launching lawsuits in the UK, Western Europe and the United States while a source at the company confirmed to The Independent separately that the UK was definitely "one of the options" being actively looked into.

The source said Yukos wanted to avoid litigation in Russia itself, where it believes the courts to be in the Kremlin's pocket, and will be looking to jurisdictions such as the UK where it is certain it will receive fair and apolitical treatment.

If the Yukos case did come to a court in the UK it would put the British government in an incredibly difficult position since the Kremlin has refused to accept in the past that Downing Street does not have the power to overrule the courts in matters which Moscow considers to be political.

Yukos believes it is the victim of a ruthless expropriation campaign orchestrated in the Kremlin and aimed at punishing its principal shareholder Mikhail Khodorkovsky, who was once Russia's richest man.

Mr Khodorkovsky, who is languishing in jail on charges of fraud and embezzlement, is widely regarded to have angered President Vladimir Putin with his outspoken criticism of the Kremlin and his self-declared interest in opposition politics. But Mr Putin insists there is nothing political in the case. He says the authorities are merely trying to ensure that the rule of law applies to everyone while the tax authorities argue that their claims for back taxes, which now amount to a little more than $18bn, are not politically motivated but bona fide.

Yukos is having none of it though and Russia and its government-friendly corporate champions are likely to face a slew of lawsuits from both Menatep, the holding company created by Mr Khodorkovsky which owns 60 percent of Yukos, and from the company management itself.

The British government can breathe easy for now though since Yukos insisted yesterday it would confine its legal activities to the US for the time being where it recently succeeded in getting a court in Houston to impose a restraining order on the bidders in last Sunday's forcible sale of Yuganskneftegaz, Yukos' main production unit.

The unit was sold for $9.4bn to an obscure shell company called Baikal Finance Group (BFG), a company which nobody has ever heard of. It remained unclear yesterday whose interests BFG represented, with analysts suggesting it was a front for either or both the Kremlin-friendly firms Gazprom or Surgutneftegaz.

Legal action cannot realistically take place until BFG is unmasked, a fact conceded by the Menatep director Tim Osborne yesterday. "We will look for recompense in a Western court just as soon as we know who it is," he said. "We're in no great hurry."

There is a possibility, however, that BFG's backers will never be outed. In 1999 Russia sold 9 per cent of the oil giant Lukoil to an obscure Cyprus- registered company called Reforma Investment Ltd; its real ownership structure has never been divulged.

Ninety-four per cent of almost 4,000 listeners who responded to a telephone poll conducted by the Ekho Moskvy radio station yesterday said they thought the Kremlin itself was behind BFG. The Russian government is known to want to consolidate the country's vast oil and gas reserves to make sure that they never again fall into the hands of an oligarch such as Mr Khodorkovsky but are held instead under strict state control.

Speaking from his cell yesterday, Mr Khodorkovsky, who amassed much of his wealth in a series of dubious auctions in the 1990s, decried Yukos' break-up as denoted by the sale of Yuganskneftegaz. "Yuganskneftegaz has been sold in the best traditions of the 1990s," he said. "The authorities have given themselves a wonderful Christmas present. Russia's most efficient oil company has been destroyed."

Mr Khodorkovsky, who denies he is guilty of any wrongdoing, asked people to remember Yukos' troubled employees, many of whom have been charged with white-collar crime or forced to flee the country.

There were signs yesterday that Yukos itself was beginning to fall apart at the seams. For the first time it defaulted on two shipments of crude oil to world markets and Mr Theede admitted that production was down slightly and that the company was beginning to feel the pinch.

"We cannot work miracles," he told reporters in London. "You cannot run a company the size of Yukos on no money and we are already starting to see an impact. There is going to have to be a significant restructuring. The government could continue this rampage and take the rest of the assets."

Mr Theede admitted that the seizure of Yuganskneftegaz was "irreversible" but defiantly said Yukos would not hand over the shares until BFG's real identity is known. That, however, may be wishful thinking.