YUKOS bankruptcy reaches court as end nears

MOSCOW, Mar 28 (Reuters) A Moscow court today began hearing YUKOS's bankruptcy case, the end game in the Kremlin's three-year campaign to nationalise what was once Russia's largest oil firm and most profitable company.

YUKOS is already just a shadow of its former self after losing Yugansk, its main production unit, to state oil firm Rosneft, and industry watchers expect it will have to give the state its two remaining oil units and five Russian refineries to pay off its debts.

They expect Rosneft will end up with those assets, too, estimated to be worth up to 20 billion dollars, as the Kremlin wants to increase its presence in the energy sector and boost Rosneft's value ahead of its planned initial public offering (IPO).

''The government now is completely in the driving seat,'' said Peter Clateman, a Moscow lawyer who heads the legal team of Russian investment group Sputnik.

''One way or another, the state is likely to eventually get most of the assets of YUKOS,'' he told Reuters.

Russian tax officials have already crippled YUKOS by freezing its accounts and hitting it with 33 billion dollars in back taxes, forcing the sale of Yugansk. Around 10 billion dollars of the tax bill is still outstanding.

Russia has also jailed YUKOS's two top shareholders for eight years on charges of fraud and tax evasion, which many analysts and YUKOS's owners say are part of a Kremlin-inspired campaign to neuter businessmen with political ambitions.

Today, the court barred YUKOS's main shareholders from taking part in the hearing. The shareholders are offshore firms representing interests of some owners, who fled Russia and are now in self-imposed exile in Israel or Great Britain.

The market is watching to see whether YUKOS will be broken up and sold off in pieces or fully taken over by Rosneft, thus leaving some value for its minority shareholders.

YUKOS's only major asset outside Russia is the Lithuanian Mazeikiu Nafta oil refinery, which it is racing to sell to the Lithuanian government this week.

Adam Landes, analyst at Russian investment bank Renaissance Capital, predicted a quick end.

''Given that Rosneft, and the state, appear to be holding all the cards, we foresee a fairly quick decision. Closure of the 'YUKOS Affair', as quickly and cleanly as possible, is needed to support Rosneft's planned IPO,'' he wrote today.

Landes said Rosneft is claiming about 10 billion dollars from YUKOS, roughly on a par with the state's claim.

INTERESTS The Russian bankruptcy suit was filed earlier this month by a group of Western banks, following their deal with Rosneft for the Russian company to buy back 482 million dollars of YUKOS debt that was secured on Yugansk oil and being chased by the banks.

Most of the banks that were lenders to YUKOS are also creditors to Rosneft and have huge business interests at stake.

And the action by the 14 banks, which include Deutsche Bank, Citigroup, ING, BNP Paribas and Commerzbank, leaves Rosneft poised to reap most benefit from YUKOS's winding up.

Clateman said the state creditors were likely to pick a loyal bankruptcy manager that would represent their interests.

The Russian bankruptcy is also likely to unite a bevy of international court proceedings brought against YUKOS by creditors in places ranging from Amsterdam to New York.

''Now you have a situation where each creditor is going after YUKOS in different courts around the world, suing it for debt. But now all the other lawsuits are likely to be suspended until the Russian bankruptcy proceedings are settled,'' Clateman said.

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