Sibneft's announcement on Friday, which came shortly after the start of a joint shareholders' meeting to elect board members to the newly merged company, stunned financial markets and sent YUKOS shares crashing by more than six percent.
"The completion of a merger between YUKOS and Sibneft is suspended due to a mutual agreement reached between the core shareholders of both companies," Sibneft said in a statement.
It was the latest dramatic twist in a drama set off by the
arrest last month of YUKOS's then chief executive Mikhail
Khodorkovsky on charges of tax evasion and fraud.
A spokesman for YUKOS said Sibneft's statement that the two firms had decided to suspend the merger was not a joint-statement.
"The only thing I can tell is that this was not a joint statement," YUKOS's spokesman Alexander Shadrin said.
YUKOS shares fell seven percent within minutes of Sibneft's
announcement, while other major stocks such as the United Energy System power grid, traded heavily on the Russian stock market, dropped by 3.5 percent within five minutes of the news.
YUKOS is Russia's largest oil and gas producer and the merger with Sibneft would have created the world's fourth-largest energy giant.
The news is likely to send ripples throughout the global energy market.