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Lifeline lost, Yukos gasps for air

Moscow, Dec. 20 (Reuters): Russia's top oil exporter, Yukos, slid closer to collapse after it lost its main production unit to a mystery buyer in a forced auction and acknowledged today that its crude shipments were slowing.

Yukos chief executive Stephen Theede said the firm would take no steps to turn over control of its Yuganskneftegaz operation until the full identity of the buyer, Baikal Finance Group, was revealed. 'Unfortunately as a result of the auction that took place yesterday, an irreversible act has taken place here,' Theede said in London.

But he said a carve-out of the 1.7 million-barrel-a-day unit would take weeks if not months and that in the meantime it was 'business as usual' at Yugansk.

Yesterday's sale by government auction of Yugansk is the culmination of a Kremlin campaign to crush Yukos' politically ambitious principal owner, Mikhail Khodorkovsky, and seize control of strategic sectors of the economy sold off in the chaotic privatisations of the 1990s.

The Kremlin's ruthless determination to impose its will stunned investors, some of whom said Russia had become too hazardous a place for westerners to do business.

People walk past the building where the Yukos buyer, Baikal Finance Group, is registered in Tver, 200 km north of Moscow. (Reuters)

'Russia is sliding towards being uninvestable. The whole thing is very sad,' said Martin Taylor, hedge fund manager at London-based Thames River capital running $5.5 billion assets. 'In the 1990s, Russian stocks traded at low valuations because everyone was worried about being robbed by the oligarchs. Now everyone is worried about being robbed by the government,' Taylor said.

Oil traders said Yukos defaulted on two December Urals cargoes scheduled to load from the Baltic port of Primorsk after failing to pay export duties and fees.

Theede, speaking from self-imposed exile, said the company could not keep producing oil without cash which tax authorities have been seizing as part of a Kremlin-inspired campaign to shatter the company. 'You cannot run a company the size of Yukos on no money so we are already starting to see an impact, we are already starting to see a decline,' he said in London.

Yukos stock lost more than a quarter of its value to 55 cents on RTS exchange in reaction to yesterday's auction, a mystery firm registered in the provincial Russian town of Tver.

At Yugansk's Siberian home down in the remote oil town of Nefteyugansk, the lights were still on at the company offices but an employee there contacted by telephone said salaries had not been paid for one month.

'Year-end holidays are close, and people don't have money. Of course people are worried,' she said, asking not to be named. Yukos is an empire with over 130,000 workers in 60 Russian cities whose livelihoods are now at risk.

Yesterday's sale was ordered to raise funds to help pay Yukos' $27.5 billion back-tax bill, the result of a relentless assault by authorities which analysts say is aimed at breaking it up. Of the total tax bill, Yugansk itself owed $5 billion. The sale leaves Yukos stripped of its main asset, which pumps about one million barrels of oil a day, more than Opec member Qatar.

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