MOSCOW - Rosneft's messy takeover of YUKOS subsidiary Yugansk led the Russian state oil company into a financial tangle on Wednesday as banks called in a $540 million loan, raising the prospect of a chain of defaults, bankers and market sources said.

With Western banks banging on its door for immediate payment of the loan, Rosneft must pay up or face further potential financial damage from cross-default provisions built into its other international liabilities, bankers said.

"Rosneft has gotten itself into a complete mess by buying Yugansk," said one U.S. banker familiar with talks between Rosneft and its banks. "Time is up for Rosneft."

A copy of the creditors' letter seen by Reuters said: "We hereby demand that you make immediate and full repayment of the outstanding loan."

"There is no grace period on this," one market source said.

A Rosneft spokesman confirmed the existence of the letter and said the company was talking to its creditors about reaching an agreement "in line with established business practice".

Failure to pay off creditors might trigger a cross-default provision built into a $150 million Eurobond issued in 2001 and maturing next year, bankers said.

But bankers said those bondholders, enjoying a juicy 12.75 percent annual coupon, are not keen to rock the boat.

Complicating things further, most YUKOS creditors are also big lenders to heavily indebted Rosneft, which has just jacked up its borrowing with a $6 billion Chinese loan secured against oil exports and channelled via Russian state bank Vnesheconombank.

Rosneft, Vnesheconombank and the Finance Ministry rushed on Wednesday to deny any link between the loan and Rosneft's $9.4 billion Yugansk acquisition.

YUKOS, which has filed for Chapter 11 bankruptcy protection in a U.S. court, has vowed to sue any participant in the sale for $20 billion.

The suit has also stalled the planned takeover of Rosneft by Gazprom, Russia's powerful gas monopoly.

Muddling Through

Steven O'Sullivan, head of research at Moscow brokerage United Financial Group, said Rosneft and the government were "improvising their way through and looking at ad hoc responses.

"Investors believe people running this show clearly don't understand how international financial markets work," he said.

Yugansk's price tag makes it the largest deal in Russian corporate history. It is three times Rosneft's equity book value.

But despite all its secrecy, the murky affair has left a trace in Russia's economic statistics: Central bank preliminary fourth-quarter balance of payments estimates show a $6.2 billion jump in Russian banks' foreign liabilities.

International creditors, worried they may not get their money back from YUKOS, negotiated fresh guarantees last year to secure their loan to its production subsidiaries, including Yugansk, before the government seized it to recover some of the more than $27 billion in tax it claimed YUKOS owed.

The guarantees mean oil receivables of Yugansk, which pumps a million barrels of crude a day, cannot be used by Rosneft as collateral until creditor banks are paid off, said bankers.

Banks that helped manage and arrange the initial $1 billion syndicated loan included Citigroup, Deutsche Bank AG and France's Societe Generale. Some of the original syndicate members have since sold off their exposures.

Societe Generale is also the agent on a separate $1.6 billion credit to YUKOS from its owners, Menatep, which has also secured similar guarantees tied to production subsidiaries.

One investment banker said Rosneft would also have to pay of Menatep as a secured creditor. "This will be unpalatable for the Russians," he said.

Russia forcibly auctioned off Yugansk in December to settle part of the $27.5 billion tax claim it has lodged against YUKOS.

The sale was the culmination of a Kremlin campaign to destroy the empire of the politically ambitious owner of YUKOS, Mikhail Khodorkovsky, and regain control over the strategic oil sector it lost in the chaotic privatisations of the mid-1990s.

But now it is hanging over Russia like a sword of Damocles.

The Yugansk sale has raised concerns about Russia's commitment to a free market and the rule of law and triggered billions of dollars of capital flight.