Clare Nuttall in Bucharest -

Lukoil is shutting down its Petrotel refinery in Romania as local prosecutors investigate suspected tax evasion and money laundering at the company. Prosecutors have also seized oil and fuels belonging to the Russian company.

Russia's ambassador to Romania, Oleg Malginov, said in a statement that the Romanian authorities had ordered Lukoil to suspend operations at the Petrotel refinery near Ploiesti. The decision is "jeopardizing the functioning of the entire production chain of Lukoil in Romania," the ambassador complained.

"I... am very concerned about the events happening around the refinery 'Petrotel'... and the atmosphere that is generated in response to this situation," Malginov's statement said.

"I hope that the investigation will be carried out objectively within the framework of the law, with due regard to the interests of both business and Romanian workers, as well as the interests of Russian-Romanian relations."

Romanian prosecutors seized Lukoil's oil and fuels inventories held at Oil Terminal Constanta, the company said on October 6. Inventories worth a total of €235m are being held by prosecutors.

On October 2, Romanian prosecutors and police raided the offices at Lukoil's refinery near Ploiesti as part of an investigation into suspected tax evasion and money laundering. Losses of around €112m from tax evasion and a further €118m from money laundering are suspected - roughly equivalent to the inventories now being held by prosecutors. The offices of Lukoil Energy & Gas Romania SRL, Lukoil Lubricants East Europe, Agentia Lukom-A-Romania and TP Log Services SRL were all targeted in the raid.Ê

Lukoil said in an October 3 statement that it had provided financial documents and electronic information resources to Romanian law enforcement agencies, and that no charges had been brought against either Lukoil Group companies or their employees.

"We are sure that the Romanian law-enforcement agencies will sort everything out and a fair decision will be taken," said Lukoil first vice-president Vladimir Nekrasov. "So far, there have been no issues between the company and Romania's tax authorities or law-enforcement agencies. Taxes to the state budget were made without fail, high-quality products were supplied to the Romanian customers."

Closure of the refinery, which processes crude imported by Lukoil from Russia, will have consequences for the Romanian fuel market, where the company has market share of around 20%. Lukoil, which acquired Romania's Petrotel refinery in 1998, operates more than 200 petrol stations across the country.