Mr. Pepelyayev said YUKOS sent a letter to the Finance Ministry on June 22 offering to solve the dispute in accordance with the law, and submitted a draft settlement agreement to the court.

However, Yelena Alexandrova, a representative of the Tax Ministry, said the tax authorities were not ready for an out-of-court settlement, and they had no proof that YUKOS was pursuing a settlement. In view of this, the Tax Ministry insists that YUKOS pay the tax claim in full.

The Arbitration Court rejected YUKOS’s request to postpone the hearing. The court said there was no official confirmation that YUKOS was in settlement talks with the tax authorities. “A court decision is not expected today. If official documents are filed with the court before the end of hearings, we will reconsider the possibility of an out-of-court settlement,” Judge Valery Korotenko said.

On Monday, YUKOS lawyers said the amount of tax claims against the oil company were higher compared with tax inspection documents. In particular, Denis Shchekin YUKOS’s tax debt was overstated by RUR 140m in tax inspection documents, and it was overstated by RUR 26m in a court decision, due to calculation mistakes by tax officials. “This casts shadow on the Tax Ministry’s decision as a whole,” he stressed. For his part, a representative of the Tax Ministry admitted that there were some technical mistakes.

The conflict between the Tax Ministry and YUKOS began at the end of last year, when the Tax Ministry completed the inspection of YUKOS’s tax payments for 2000. YUKOS is accused of evading taxes through artificially created companies registered in Russian regions and cities unlawfully offering additional tax breaks.

On December 29, the company received the results of the inspection, saying that it was guilty of wrongdoing and owed the state more than RUR 98bn in unpaid taxes and interest. Later, it raised the claim to RUR 99.3bn. On May 26, 2004, the Moscow Arbitration Court ruled that YUKOS should pay the money.