AP: Texas

12/18/2004

By PAM EASTON  / Associated Press

Russian state-controlled natural gas giant Gazprom has appealed a U.S. bankruptcy judge's order granting oil giant Yukos' request for a temporary injunction to block this weekend's auction of its main production subsidiary in Moscow.

A hearing was scheduled Saturday in Houston, where Yukos filed for Chapter 11 bankruptcy on Tuesday. U.S. Bankruptcy Judge Letitia Clark granted Yukos' request on Thursday for a temporary restraining order delaying for 10 days the auction of the Yukos unit, Yuganskneftegaz.

Yukos said the bankruptcy filing was a last-ditch effort to seek an emergency order canceling the auction in Moscow.

On Friday, Russia pledged to proceed with the auction, saying the U.S. order is irrelevant on Russian soil.

However, Gazprom, the expected winner of Sunday's auction, may not be able to pay after a consortium of Western banks reportedly put on hold billions of dollars in credit it needs to fund its bid.

The banks — including Deutsche Bank, ABN Amro, BNP Paribas, and Dresdner Kleinwort Wasserstein — froze between $10 billion and $13 billion it had loaned Gazprom for its bid, Russian and other news reports said Friday.

Citing what it called high-ranking Western financial sources, the ITAR-Tass agency reported that the banking group had decided to freeze the deal at least until the U.S. court reaches a final decision.

With a big presence in the United States, the banks could potentially face legal action if they violated the court order.

The Russian government planned to sell Yuganskneftegaz to pay off some of the $27.5 billion in back taxes it says Yukos — Russia's largest oil producer — owes.

The government has put a starting price of $8.6 billion on the auction, far below what Yukos says the unit is worth. The Western Siberian unit pumps 1 million barrels per day, or 60 percent of Yukos total output.

Gazprom was expected to win the auction, making it — and by default, the Russian government — one of the biggest oil players in Russia virtually overnight.