MOSCOW (AFP) - Russia's justice ministry announced plans to break up the Yukos oil giant in a fatal blow to Russia's largest oil producer and former Western investor darling that once dared challenge President Vladimir Putin's rule.
A ministry spokeswoman said the state had decided to strip Yukos of a part of its crown jewel -- Yuganskneftegas which accounts for 62 percent of the company's production -- for the company's slow payment of back taxes.
Yukos shares fell more than 10 percent on the main dollar-denominated RTS index within minutes of the news and company executives refused to issue any immediate comments.
The justice ministry said it has received an independent valuation of the unit placing Yuganskneftegas' value at 10.4 billion dollars (8.5 billion euros) -- far below initial valuation figures reported by the Russian press.
"According to the justice ministry's head office in Moscow, the Russian federation's tax authorities are not satisfied with the rate at which Yukos is paying off its back taxes," a justice ministry spokeswoman said, justifying the auction of part of Yuganskneftegas.
Yukos's assets are still frozen and the company was never likely to re-emerge whole after being saddled with a multi-billion-dollar tax debt that it is unable to pay off without access to its bank accounts.
The tax charges emerged only after company founder Mikhail Khodorkovsky -- now in jail -- expressed open political opposition to Putin last year.
After forming the first oil giant that was transparent enough to meet Western accounting standards, Khodorkovsky tried -- but failed -- to stack parliament with allies in an effort to weigh in on Russia's future economic course.
His policies quickly clashed with those of a separate team of other Putin insiders, who backed some of Khodorkosvsky's oil rivals.
In past weeks, Yukos's fate hung on the Western valuation of Yugasnk since a large price would seemingly put it out of reach of any single Kremlin-linked oil company.
Russian news reports last month said that Dresdner Kleinwort Wasserstein had valued Yugansk at between 15.7 and 17.4 billion dollars -- a fair value according to analysts' estimates.
That price would leave the justice ministry with the only option of selling off Yugansk in pieces. Dresdner declined to comment on the announcement.
Justice ministry official Alexander Buksman was quoted as saying by Interfax that the state intended to sell a share of Yuganskneftegas that would be large enough to cover the outstanding debts.
But this figure is vague at best since Yukos faces separate tax bills and penalties for both the company and its affiliates for the years 2000 and 2001 and possibly the following two years as well.
Because of soaring global oil prices and the snail's pace of the state's case against the company, Yukos has managed to almost completely cover the 3.4 billion dollar bill for 2000.
Alfa Bank estimated that Yukos would be able to cover the 2001 tax bill as well by the middle of next year -- making the state's case of stripping Yugansk away from Yukos that much more politically damaging.
"The time delay and the high oil price are both conspiring to undermine the government's moral and financial justification for taking Yuganskneftegas," said Chris Weafer of Alfa Bank.