There had all along been a lingering suspicion that just about anything could happen in the Yukos saga. Yukos’ troubles, runs the consensus, are less to do with its tax-paying record and rather more to do with the increasingly open politics of Khodorkovsky, who along with Platon Lebedev is facing the prospect of a jail term when their personal trials on fraud and tax evasion charges come to an end. Russia’s richest man, it was assumed, had overstepped the invisible line that divides business from politics in Putin’s Russia, by criticizing the president and by making little secret of donations to the country’s liberal opposition parties.

On one front, Yukos has continued to fight its corner according to the explicit rules of the game. The firm still has a court case to fight against the tax ministry for its “illegal” prosecution of the firm, and is also suing the ministry for around $550-600 mil in withheld value-added tax refunds. It has throughout insisted that the ministry’s assault on it is not only illegal, but also “politically-motivated” and “selective”. The company says its tax payments in 2000-2003 averaged $52.39/mt of production – only fractionally less than Lukoil and more than rivals Surgutneftegaz, Sibneft and Tatneft. Its “tax-optimization” strategies, it insists, were similar to those of its peers.

But on the other hand, both Yukos and Khodorkovsky had at the same time read between the lines and offered concessions to the government — concessions which most analysts expected would be enough to keep the bailiffs at bay. Yukos wrote to prime minister Mikhail Fradkov in June with proposals to dilute the role of Khodorkovsky vehicle Group Menatep in Yukos, giving the firm a more state-friendly sheen. Shares would be shifted back to the company, which would then hand them over to the government or sell them to raise the funds to pay its bill.

That proposal was subsequently repeated by Menatep itself, and finally made again in a personal statement from Khodorkovsky. If the government’s position softened at all as a result, the difference was microscopic. It is possible that resistance from other core shareholders to the surrender, or to conditions attached to the offer, may have derailed chances of a settlement.

Yukos last week then made fresh moves to appease the ministries, offering to “pay what it could” towards its tax bill. The company said it would cough up $1.25-1.3 bil in cash immediately – including the $550 mil or so it claims is owed to it by the tax ministry – in the hope of being able to restructure the rest of its debts over a more manageable period of time. Given that the firm was also at the time attempting to pay its long-term bank debts, having been served with notice of an “event of default” by its creditors, the strain on its accounts was substantial.

In early June, former ceo Simon Kukes – later replaced by chief operating officer Stephen Theede - told Platts that the company would need about six months to restructure – but that if it had that time, then its low debt to equity ratio of around 20% would allow it to pay all that and more. “We can easily – not easily, but we can raise $10-bil on the market,” he said. “And if we combine it with some small sales I think it can benefit shareholders and the overall economy… I think it’s a solution… But the government has to give us a chance.”

But the cash offer seems to have been greeted just as enthusiastically as an original offer to pay up with the company’s 35% stake in fellow Russian producer Sibneft – a stake worth more than $4 bil – which was also ignored by the authorities.

No new twist would be too big a surprise in the Yukos saga. Investment bank Renaissance Capital said on 21 July that "yesterday’s news, while grim, does not necessarily eliminate the possibility of a negotiated outcome", and added: "We feel that asset sales at extremely distressed prices will still be too much of a scandal, which the authorities would prefer to avoid". But with the stakes raised again, it seems increasingly unlikely that the government will back down completely from its latest and most substantial threat.

Investors will always remain interested in getting hold of a slice of Russia’s abundant reserves and exports that have climbed this year to more than 9 mil b/d. But with bankers already saying they have deals on hold pending the outcome of the Yukos crisis, quite what the toll of these latest events will be on the country’s investment climate, only time will tell.

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