In 1993, YUKOS, an oil producer and supplier, was created by the Russian government by resolution. It quickly became a major economic force in Russia, providing 20% ​​of the country's oil and 2% of the world's oil supply. In an effort to restructure the oil industry, the government created four independent companies to refine and distribute oil, of which YUKOS was one of them. IN 1995 YUKOS was already having management problems and the government auctioned off 45% of the company's shares. Shortly thereafter, YUKOS became Russia's first private oil company. Under the direction of Mikhail Khodorkovsky, YUKOS restructured itself and became a very profitable company. This success did not come without difficulty as YUKOS' delivery system could not keep up with the company's growing production. But Khodorkovsky was up to the challenge and by 2003, not only was LUKOS the largest Russian oil company, but a company respected throughout the world and praised for its great managerial and organizational efficiency. Politics began to become a factor in YUKOS' growth plans, and YUKOS was forced to fight with Russian authorities over the construction of a new pipeline. However, the merger between YUKOS and competitor Sibneft gave YUKOS the largest oil reserves in the world. But things changed quickly in 2003 and not only were the pipeline projects cancelled, but the fall of YUKOS had just begun. Mikhail Khodorkovsky was arrested on charges of tax fraud and was forced to resign. The merger with Sibneft was cancelled. In 2004, YUKOS itself was accused of tax evasion, and the company scrambled to try to file for bankruptcy protection. Eventually, the Russian government auctioned off the company's remaining assets, and many YUKOS executives fled Russia for fear of arrest. Just like that, the world's third-largest oil producer was in ruins. The rise and fall of YUKOS were the result of many external forces. The first is the unstable nature of the Russian political system. Privatization of large companies was a relatively new concept in Russian history. Internal squabbles between first President Yeltsin and then President Putin and other members of the Kremlin led to much unrest. Government officials felt threatened by these new entities and bloody power struggles ruled the day. The powers enjoyed under Yeltsin were called into question under the Putin administration. The aggressive prosecutions and arrests of Khodorkovsky and others may also be linked to these political disputes. Indeed, many of the events surrounding the legal issues that crippled YUKOS were attributed to a deliberate effort by the Russian government to regain control of the powerful YUKOS empire..