Saturday's move comes two days after a court froze its assets and gave it five days to pay a $3.4 billion tax bill.

"The OMON [special forces] arrived, they are going to take over our central office," said Yukos spokesman Alexander Shadrin. "They are waiting for the prosecutor. Of course none of the management are working today."

He said company employees would not try to resist the police takeover.

"We will wait until Monday and see what is going on."

Bankruptcy warning

YUKOS has warned it faces bankruptcy because of the immediate tax demand and says that with its accounts frozen, it cannot even sell off assets to keep its operations going.

The $3.4 billion tax demand for 2000, which one Russian news agency reported has been matched by an almost identical one for 2001, follows the arrest of the firm's founder and former CEO Mikhail Khodorkovsky.

"The OMON [special forces] arrived, they are going to take over our central office"

Alexander Shadrin,
Yukos spokesperson

Many see his arrest as a Kremlin move to stub out the political ambitions of Russia's richest man. He is on trial on charges of fraud and tax evasion.

Russia's government has said it has no plans to renationalise Yukos or any of the country's other industrial giants. Many of those firms were bought cheaply off the government in murky privatisation deals during the 1990s.

Crippling tax demands

Last month President Vladimir Putin said he had no interest in seeing the firm - which pumps more oil than Libya - going bust, but the firm says the tax demand will cripple it.

The ruin of Yukos, Russia's biggest oil producer with output at about 1.72 million barrels a day and more than 100,000 employees, could tarnish Russia's image abroad and slow growth in the oil sector.

Some analysts have suggested that the only way for the company to survive would be for Khodorkovsky and his partners to relinquish control. They hold control through involvement with the Menatep holding company, which is Yukos' largest shareholder, and through personally owned shares.

Khodorkovsky, listed as Russia's richest man, and a key associate, Platon Lebedev, are jailed on charges of fraud and tax evasion in separate cases.

Khodorkovsky is believed to have become unpopular with the Kremlin for his funding of opposition parties and the yearlong probe against the company also is seen by some analysts as a warning to other billionaire businessmen to stay out of politics.