Developments in Russia on Oct. 19 shed light on just how close oil firm Yukos is to dismemberment and just how far the government will go in breaking the company up completely. The first blow came from Semyon Vainshtok, president of Russia's state-owned oil transport monopoly Transneft, who said that while Yukos made arrangements in September to pay forward its transit fees, its period of pre-payment is running out. Since the government has siphoned away Yukos' operating income to pay the firm's back taxes, Yukos proposed to Transneft that it pay for future transit fees in crude oil. Vainshtok agreed in principle, and the figure he said his firm agreed to would come to about 100,000 barrels per day (bpd), or about 5 percent of Yukos' total output. While this will allow Yukos to continue exporting for the time being, resorting to barter trade is normally one of the last events that occur before a company dies. Very soon, even meeting payroll will be problematic for the beleaguered oil major. The second new problem is that Deputy Economic Development and Trade Minister Andrei Sharonov said the impending auction of Yukos' primary subsidiary, Yuganskneftegaz, might not raise enough money to pay off all of Yukos' debt. The starting price for the Yuganskneftegaz auction will likely be $3.73 billion, and since sources in the Kremlin indicate that state-run natural gas monopoly Gazprom has been pre-selected as the winner, the final sale price will unlikely be much higher than the initial asking price. For Gazprom, the absorption of Yuganskneftegaz is the next step toward becoming an energy supermajor in its own right. In fact, any "bidding" may be marginal. The Natural Resources Ministry continues to threaten to revoke Yukos' production licenses, which would only drive the value of its subsidiaries down more. Similarly, Dresdner Kleinwort Wasserstein, the German firm which performed the independent valuation of Yuganskneftegaz, noted that the subsidiary is the guarantor of some $2 billion in loans to its parent Yukos. That liability will not only reduce the firm's value, but also make it extremely unlikely that any firm that does not have explicit state backing — or better yet, state ownership, such as Gazprom — could stomach the risk inherent with such a purchase. Yukos has so far paid some $3 billion of its total of $7.4 billion in back taxes. But that figure only includes back taxes and fees for 2000 and 2001. The Tax Ministry is putting together annotated tax bills for 2002 and 2003 as well. Add in the expected low sale price for Yuganskneftegaz, and the 2000 and 2001 taxes and fees will be covered, but with nothing to left over to pay for 2002 and 2003. This, of course, is assuming that the government does not find even more fines for Yukos to pay — which it will likely do. Government bureaucrats have been quite creative in finding ways to bring Yukos down; the firm has even been fined for improperly breeding rabbits. Sharonov's statement raises the distinct possibility that the "auction" of Yuganskneftegaz is only the beginning of Yukos' end. According to sources within the Energy Ministry, in order to pay off its government-mandated debts Yukos will also be forced to part with its other two major subsidiaries: Tomskneft and Samaraneftegaz. Without its three primary production assets, Yukos as a company is, in effect, a shell. For government entities or government-allied entities, this situation is ideal; local assets capable of producing crude amounts roughly equal to the output of Organization of Petroleum Exporting Countries producer Libya are up for "sale" at cut-rate prices. Gazprom will certainly be the biggest winner, but other private pro-Kremlin firms can expect to do well also. The three biggest private contenders will be Vagit Alekperov's Lukoil, which often works hand-in-glove with the Russian government; Vladimir Bogdanov's Surgutneftegaz which has evolved from an avaricious anti-government firm to an avaricious pro-government firm; and Roman Abramovich's Sibneft, which has been one of the leading schemers behind Yukos' destruction. Even before the auctions, Sibneft has already done the best of any player. Yukos supposedly paid $3 billion in 2003 to purchase the bulk of Sibneft. With government approval, Abramovich has not only reasserted control over his company's shares, but also not returned the cash to Yukos. Who will get what has not yet been settled, and the actual winners will be determined based on who can get in Putin's good books the most effectively. Now that Yukos' fate — death — has been decided, making plans for dividing up the corpse is all that remains.