The auction of Yukos's main production unit has eroded confidence in Russia's legal and judicial institutions, US State Department spokesman Richard Boucher said Monday. 

"We think the case has eroded Russia's reputation as a place to do business and eroded confidence in Russia's legal and judicial institutions," Boucher told reporters.

"We've looked for a solution to the Yukos issue that might enforce tax laws but avoid outcomes that harm investors, creditors and employees, and we don't believe the auction was a step in that direction," Boucher said.

The spokesman also said that "conduct of the case has raised serious concerns at the lack of transparency and independence of Russia's investment and tax laws and the courts."

According to reports reaching Washington, Russia auctioned oil company Yukos's Yuganskneftegaz production unit on December 19 to Baikal Finance Group, a previously unknown firm. The sale was ordered to raise funds to help pay Yukos's US$27.5-billion back-tax bill.