WASHINGTON, April 27 (UPI) -- Yukos oil has just informed a giant global banking consortium it may be forced to default on a $1 billion loan. Is this the end of Yukos? Not quite: But it is likely to be the beginning of the end. Russian President Vladimir Putin will make sure of that.
The real problem Yukos faces is political and personal, not economic or structural. It is the largest oil corporation in Russia and one of the biggest in the world. It is energetically developing colossal assets at a time when global oil prices are relatively high. And, given the escalating violence in Iraq and the threat of major destabilization in Saudi Arabia, could go a lot higher.
But Yukos is the basis of the fortune of the richest man in Russia and one of the richest in the world: billionaire oligarch Mikhail Khodorkovsky. And he made the very bad mistake of challenging President Putin.
Since last October Khodorkovsky has been languishing in a Moscow jail on charges of fraud and tax evasion. He has long since been toppled as chief executive of Yukos. But he is still a billionaire and his vast shareholding in Yukos is the basis of his fortune.
It is no coincidence then, that the overwhelming machinery of the Russian state and judicial process has been focused on fettering Yukos and bringing it to its knees.
Yukos announced Monday it may be forced to default on a $1 billion bank loan. The oil giant said in a statement that a consortium of international banks including Citibank, Commerzebank, Credit Lyonnais, Deutsche Bank and HSBC Bank of Britain had notified it that they anticipated a possible default.
Yukos said in a statement that the main reason for the action was a "demands by the Russian Tax Ministry" that the giant oil company pay 99 billion rubles, or $3.5 billion, in outstanding taxes to the state.
But on April 19 the Moscow Arbitration Court had prohibited the corporation from disposing of its assets. This move "marked a new escalation in pressure on the company whose largest shareholders were jailed last year," the Wall Street Journal reported from Moscow.
Yukos finance chief Bruce Misamore told the WSJ that its corporate executives were "quite surprised" by the court order. "We will be fighting this vigorously," he said.
The day after the ruling, Russian tax officials from the Main Department for Tax Crimes and the Main Legal Department of the Interior Ministry raided Yukos headquarters in Moscow
Then on Monday, April 26, UPI's Peter Lavelle reported from Moscow rumors that another Russia oil giant, Sibneft, had won Kremlin approval to sell 25 percent of its worth to France's TotalFinaElf. This possibility infuriated the White House, according to Bush administration sources. For it froze America's ChevronTexaco out of any deal with Sibneft.
A TotalFinaElf-Sbneft link-up would also be another body blow for beleaguered Yukos. For last year when Khodorkovsky was still riding high, he had bought -- or thought he had bought -- 92 percent of Sibneft from his fellow oligarch Roman Abramovich.
But as Lavelle wrote, "Final detachment of Sibneft from Yukos essentially makes Yukos insolvent and unable to pay off its back taxes. This allows the Kremlin to foreclose on Yukos and sell off its assets." This would be a huge boost in financial clout and raw power for the Russian state and leave Khodorkvsky stripped of most of his enormous wealth and the clout it brought him.
Abramovich recognized far more quickly and clearly than Khodorkovsky did that Putin was preparing to move against the entrenched vast financial-political power of the oligarchs. He has consistently tried to sell most of his vast holdings in Russia and get his money out of the country while the going was good.
Khodorkovsky was not so lucky, nor, for all his genius at moneymaking, so wise. He faces a sentence of up to 10 years in jail if convicted.
Yuri Schmidt, one of Russia's top lawyers and a leading member of Khodorkovsky's defense team said on April 13 that he believed Moscow prosecutors "want to complete the investigation by May and then the trial may start some time in June or July."
Meanwhile, Putin is facing pressure from his own business community to quickly settle the Yukos-Khodorkovsky case quickly, one way or another.
Vladimir Potanin, another billionaire oligarch who controls the giant Norelsk Nickel mining corporation has warned the case must be settled fast to avoid weakening business confidence and slowing economic development.
"The lack of a guarantee of quick and just settlement of disputes in the courts is hampering the development of both large and small businesses," Potanin said in an interview published April 20 in the business newspaper Vedemosti.
"Respecting property rights is question number one. No less urgent is the issue of defending business in the court system," he said. "The less the hysteria and pressure surrounding this case, the quicker it will end."
But what becomes clearer by the day is that Putin is indeed determined to end the affair quickly, but only on his own terms. And he is doing it.
