But sources close to both firms said on Tuesday it would take at least a month to nail down details of the divorce.

The sources said the preliminary deal was signed over the weekend between both parties in London, but YUKOS was still insisting on huge compensation from Sibneft, which unilaterally suspended the merger last month.

However, Russian business daily Vedomosti reported on Tuesday YUKOS agreed to scrap the merger, but was not insisting on payment of $1 billion compensation from Sibneft anymore. 

However, a source close to YUKOS said the company still
wanted compensation. 

"It will take the two sides at least a month to draw up the divorce structure. YUKOS agreed to scrap the merger, but it is
still talking about the need for compensation from Sibneft,"
said a source close to YUKOS.

"I can only confirm that the two sides agreed to scrap the merger," a source close to Sibneft said.

Oil giant

YUKOS and Sibneft agreed to join forces in April 2003, to create the world's fourth largest oil firm. Yukos paid $3 billion and swapped 26% of its shares for a 92% stake in Sibneft.

But last month, Sibneft called a halt to the merger, which was almost fully completed, following the arrest in October of YUKOS' main shareholder, Mikhail Khodorkovsky. 

The arrest of Russia's richest oil tycoon was widely seen as an attempt by the Kremlin to punish the billionaire for his political ambitions. 

Analysts have said that by abandoning the merger with the well-connected Sibneft, YUKOS will make itself more vulnerable to judicial attack from state authorities. 

YUKOS' offices have been raided on numerous occasions on the orders of state prosecutors and the tax ministry has said the company may owe up to $5 billion in back taxes.