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Russneft Told to Pay $8.1Bln in Back Taxes

The Moscow District Federal Arbitration Court on Friday ordered beleaguered oil company Russneft to pay 20 billion rubles ($8.1 billion) in back taxes.

The amount includes 17 billion rubles in tax debts for 2005 and 3 billion rubles for 2003 and the first half of 2004.

Friday's decision could open the door for Basic Element, owned by Kremlin-friendly tycoon Oleg Deripaska, which is bidding for Russneft, to acquire the company cheaper, analysts said.

Russneft vice president Eduard Sarkisov said Saturday that the company would consider this week whether to appeal the court's decision.

Mikhail Zak, senior analyst at Veles Capital, said that while the tax demand was large, it would not bankrupt Russneft.

"The revenues generated by Russneft are sufficient to pay off the amount," Zak said. "The only drawback is that these funds will no longer go into expansion and development as previously planned by the company."

"This is more about political, rather than legal issues," said Timur Khairullin, oil and gas analyst at Antanta Capital. "Bearing in mind what happened to Yukos, there is no guarantee that the authorities will not slap more tax claims on the company to take control of it."

Russneft, established in 2002 by Mikhail Gutseriyev and his partners, quickly rose to become one of the country's top 10 crude producers.

Tax authorities have brought a total of 11 lawsuits against shareholders in Russneft, and all the company's shares and assets have been frozen.

In July, a Moscow arbitration court approved a back-tax demand for $145 million against Russneft. Gutseriyev quit the company, citing pressure from the authorities, and fled the country.

In August, a Moscow court issued an international arrest warrant for Gutseriyev on charges of illegal business activities and tax evasion. Sources close to the former Russneft president have said he is living in London.

A Russneft source said in September that the company was handed over to Deripaska's Basic Element in July in a $6 billion deal. Gutseriyev received a payout of $3 billion, the source said.

Basic Element applied in September to the Federal Anti-Monopoly Service for approval to buy a 100 percent stake in Russneft and is still is awaiting a decision on the deal.

Swiss-based commodities trader Glencore, which helped fund Russneft's rapid expansion over the last five years, in October also expressed interest in buying more minority stakes in three of the firm's subsidiaries.

The service has twice put off making a decision on applications from both bidders.
"The applications are still being processed and it is unclear when final decisions would be made," an official in the anti-monopoly service's press service said Friday.

"If Basic Element's acquisition plans were approved by the Federal Anti-Monopoly Service, there is a big chance the authorities would withdraw its tax evasion case against Russneft," Zak said.

Friday's court decision "would not scare away potential investors such as Glencore and Basic Element," he said. "Glencore already has a stake in Russneft and the company's back taxes would not deter its investment plans."

(The Moscow Times 28.i.08)

 
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