Tuesday, July 06, 2004

Ba-da-bing, Ba-da-Bush-boom

I have not been paying much attention to the travails of Mikhail Khodorkovsky, Russia's richest man who is currently in jail charged with numerous financial crimes. But today I've been learning more about his company, Yukos. Not only is Yukos the second largest oil producer in Russia,

Yukos alone accounts for 4% of Russia's economy. With daily output of 1.7 million barrels, it supplies nearly as much as OPEC has promised in extra output to cool red-hot world oil prices.

The firm says a looming $3.4bn back tax bill confirmed in court last week could force it to go bust. Since then, tax ministry bailiffs have frozen its bank accounts and delivered a demand for a further $3.4bn for 2001.

Yukos' worried foreign bankers then weighed in with a bankruptcy order to recoup loans of $1bn.

Yukos's chairman last week painted a doomsday scenario, warning that it may have to halt production.


I would not begin to speculate on what might happen to the world economy if Yukos were to declare bankruptcy. But if they halt production as their unnamed chairman warns they might Bush will cry during his next photo-op.

OK, I will speculate a bit: a Yukos bankruptcy will further weaken our imperiled pension system. How many retirement funds in this country do you imagine might have been invested in a petroleum producer that accounts for 4% of the Russian economy?

Update: NTodd provides the background.