RusEnergy

March 1, 2005 Reuters LONDON - Investors in Russia's oil and gas sector are likely to see lower legal risks following the dismissal of oil company Yukos' bankruptcy case in a U.S. court last week, Fitch Ratings said in a statement on Monday. Yukos filed its claim for bankruptcy protection in a Houston court late last year, complaining it was the victim of a Russian government-orchestrated campaign to destroy it and former owner Mikhail Khodorkovsky, who is facing a 10-year prison term in Russia for fraud and tax evasion. The case was thrown out on Friday by the judge who said any dispute belonged in a Russian forum. Yukos quickly appealed the same day asking for a reconsideration of its case. "It seems clear from this recent court decision that foreign investors and banks now face less legal risk than before the decision," said Jeffrey Woodruff, a director at Fitch covering energy issues in Moscow. "We therefore expect creditors to be more comfortable going ahead with deals that might have been on the back burner until now." Yukos was fighting the auction of its main operating unit Yuganskneftegaz to help pay a multibillion dollar back tax bill. "For those companies and lenders directly involved in the Yuganskneftegaz transaction, last week's court ruling is seen as a credit positive event by Fitch as it prevents the legal dispute from spreading to international jurisdictions," Fitch said in its statement. "On the other hand, legal risks for other oil companies operating in Russia might be seen to have increased as the Russian government grows more confident that foreign entities will not meddle in domestic affairs, but Fitch does not hold this view at the present time," the statement said.