Yukos - The Fall of a Russian Oil Giant


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Case Details:

Case Code : ECOA114
Case Length : 14 Pages
Period : 2000 - 2003
Organization : Yukos
Pub Date : 2004
Teaching Note :Not Available
Countries : Russia
Industry : Oil and Energy

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction

OAO Yukos Oil Company (Yukos) was Russia's second largest company with a market capitalization of US$31billion in 2003. Yukos produced 20% of Russia's oil and accounted for 6% of its GDP.

In 2002, Yukos was the only Russian company amongst the world's top ten oil and gas majors.1 In the mid-1990s, Yukos had adopted western management practices under the charismatic leadership of Mikhail Khodorkovsky. The company seemed to have a bright future.

But in mid-2004, Khodorkovsky was in jail, even as Yukos faced a deep liquidity crisis.

The Arbitration Court of Moscow had asked the oil company to pay RUR 99.3bn, or about $3.4bn for the year 2000, in back taxes and fines before 7th June 2004. The company failed to pay the amount before the deadline. On July 2, Yukos defaulted on a $1 billion loan provided by a group of banks led by Societe Generale.

The court froze most of Yukos'assets and accounts. Under these circumstances, the company warned investors that it could be driven into bankruptcy with in few weeks2. This announcement sent shock waves in both domestic and international oil markets. Yukos share prices fell across the board and world oil prices soared (Figure (i)). The Yukos announcement also prompted leading international rating agencies to ring alarm bells over Russia's overall economic and political performance.3..

Excerpts >>

1] According to the 2002 Financial Times' top-ten list of world's largest oil companies by market capitalization.
2] “Investors offer bail out to save Russia's Yukos,” www.russiajournal.com, 23rd July 2004.
3] Korchagina, Valeria. “Yukos: We'll Be Bankrupt in Weeks,” www.themoscowtimes.com, 23rd July 2004.

  

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