Russian authorities raised grave concerns about whether the government will continue to honour property rights yesterday by striking at the heart of Yukos, the country's largest oil company, saying they will sell its main operating subsidiary to settle a $3.4 billion (€2.8 billion) tax bill.

The Ministry of Justice, which declined to seize the company's non-core assets, said it would sell Yuganskneftegas, the company's biggest subsidiary, which accounts for 60 per cent of all its crude oil production.

An enforced sale of Yukos's core assets would end months of legal battles around the company and leave it in ruins.

Yukos shares, which are worth only a fraction of their value before the company's feud with the authorities, yesterday closed at $6.80, down 13.4 per cent.

The move comes a month after President Vladimir Putin said the bankruptcy of Yukos was not in the interests of his government. Yuganskneftegas produces one million barrels of oil a day, 60 per cent of Yukos's total, and is valued at $30 billion on the basis of its reserves and $12 billion on the basis of its discounted cash flow.

"This company has way more assets than the [$3.4 billion\] tax claim Yukos must pay. The government is trying to cut the heart out of the company," said Mr Stephen O'Sullivan, head of research at UFG Deutsche.

A Yukos representative told one Russian news agency that Yuganskneftegas could be sold before the end of the month for as little as $1.75 billion.

Analysts said that a state-owned company or a firm loyal to the Kremlin would be the most likely beneficiaries of what they said was an alarming example of property redistribution in Russia.

No senior government official commented yesterday on the decision.