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    U.S. Protests Sale of Yukos Unit

    Transaction ordered to help pay company's $27.5 billion back-tax bill.

    WASHINGTON -- The Bush administration is protesting Russia's auction of Yukos's main oil production unit and warned it could have a "chilling effect" on foreign investment in Russia, according to Reuters.

    "We are disappointed that Russia went ahead with the auction of the Yukos subsidiary," White House spokesman Scott McClellan told reporters.

    President Bush could raise the issue when he meets on Feb. 24 in the Slovak Republic with Russian President Vladimir Putin.

    McClellan's toughly worded statement on Yukos stood in contrast to Bush's pledge on Monday not to let disputes get in the way of good relations with Putin, a key ally in the war on terrorism.

    Putin threw his weight behind the controversial sale of top oil firm Yukos's core asset, Yugansk, on Tuesday despite a threat from the stricken company to escalate its legal battle in foreign courts. Putin did not identify the owners of Baikal Finance, which was unknown before it acquired Yugansk in Sunday's auction. The sale of the unit was ordered to raise funds to help pay Yukos's $27.5 billion back-tax bill.

    "We had hoped for a solution that would allow for the legitimate enforcement of tax laws but avoid harming investors, especially American investors," McClellan said. "We have communicated to the Russian government repeatedly that its handling of the Yukos matter could have a chilling effect on foreign investment in Russia and affect its role in the global economy," McClellan added.

    McClellan said the administration believed it was "Russia's responsibility to seek greater integration into the world economy, to create an environment governed by the protection of property rights and rule of law, and to restore confidence in its political legal and judicial institutions," and that Russia should ensure a stable, predictable, and transparent environment for those investors.

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