YUKOS said that it could face bankruptcy before the end of this year if the Russian tax ministry continues to pursue its 99 billion roubles (£1.9 billion) claim against the country’s largest private enterprise.

The warning yesterday, from Yuri Beilin, president of Yukos, came a day after Moscow’s arbitration court upheld a claim from the tax ministry for the unpaid taxes and fines.

Adding to the company’s troubles, the Government has secured an injunction freezing the assets of Yukos. The company said: “Until the injunction is lifted, the company is unable to sell its assets in order to obtain liquid funds. Consequently, if the tax ministry’s efforts continue, we are very likely to enter the state of bankruptcy before the end of 2004.”

Mr Beilin said that Yukos had some $800 million (£436 million) in liquid funds, a figure that could rise to $1.2 billion with second quarter oil revenues, still insufficient to meet the Government’s demand.

Yukos stock tumbled 12 per cent yesterday and the warning that Russia’s largest company might be driven into liquidation sliced 3 per cent off the value of the Moscow RTS stock index.

Wednesday’s court ruling on the Yukos tax claim emerged ahead of today’s preliminary hearing into the charges of fraud and tax evasion against Mikhail Khodorkovsky, the former Yukos chief executive and the company’s principal shareholder, who remains in jail.

The two cases are widely believed to be connected and some allege that the case against Yukos is an attempt to coerce Mr Khodorkovsky into relinquishing his majority ownership of Yukos. According to Dmitry Gololov, the Yukos lawyer, documents pertaining to the general prosecutor’s work on the Khodorkovsky case turned up in the tax ministry’s case against Yukos.

During the Arbitration Court proceedings, the tax ministry was given three days to present its case but Yukos found its presentation was cut short after three hours.

Yukos has been trying, unsuccessfully, to distance itself from its high-profile former chief who incurred the Kremlin’s wrath for his outspoken political ambitions, his funding of deputies in the Duma (Russia’s parliament) and attempts to influence legislation pertaining to the oil industry.

Yesterday’s warning from Yukos is also being seen as an attempt to push the Kremlin into striking a deal over the tax bill. Yukos insisted yesterday it had been Russia’s third largest taxpayer in 2002, the year relating to the ministry’s claim paying some $1.9 billion to the Government. Mr Beilin said: “I would like to hope the Government doesn’t have as its objective the bankruptcy of this company.” He urged an “amicable resolution”.

The claim against Yukos, which the company believes is entirely unfounded, relates to the use of sales companies benefiting from regional tax advantages. Yukos sold about half of its oil in 2002 through some 14 such companies that passed on the tax benefits to Yukos. The tax ministry alleges these were front companies under the control of Yukos but Yukos says these were entirely legal arrangements and widely used by other oil companies.

Separately, the Russian Government plans the sale of the state’s 7.6 percent stake in oil major Lukoil, Russia’s second largest oil company. German Gref, the economy minister, said the stake, which is worth $1.9 buillion, would be auctioned by the Federal Property Fund by the end of the year.

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