A Russian financial journal reports that Russian oil giant Rosneft, despite earlier indifference to Western sanctions, is now expecting to feel their pinch and has asked Moscow for more than $40 billion in debt relief.
The newspaper Vedomosti, in part a joint venture of Dow Jones and The Financial Times, quoted anonymous sources on Aug. 14 as saying that Rosneft CEO Igor Sechin proposed that the Kremlin set aside 1.5 trillion rubles ($41.6 billion) from its National Wealth Fund to buy Rosneft bonds.
Rosneft also requested that it be awarded the right to control new onshore oil fields in Russia and offshore fields in the Arctic without having to submit to competitive bidding, Vedomosti said.
Already, the paper said, Prime Minister Dmitry Medvedev has directed government financial analysts to evaluate the request.
Rosneft declined requests by both Reuters and Agence France Presse for comment on the Vedomosti story.
The amount requested exactly matches the size of Rosneft’s net debt – 1.5 billion rubles – at the end of the second quarter of 2014. In its latest financial report, the company said it needs to pay back 440 billion rubles to creditors by the end of 2014 and 626 billion more in 2015.
In his request, Vedomosti reported, Sechin linked the aid directly to the Western sanctions, which are meant to make credit difficult to obtain for Russian oil companies. They include a U.S. ban on Rosneft’s access to loans and other credit instruments that mature over 90 days or more.
The newspaper said parallel sanctions imposed by the European Union don’t include that provision, but that EU nations are following the American lead unofficially. Western sanctions targeting gas companies are much less strict; Europe gets about one-third of its gas supplies from Russia.
Rosneft isn’t the only Russian company feeling the bite of sanctions. VEB and Russian Agricultural Bank also have sought state financial support, presumably from the National Wealth Fund, whose assets now stand at 3.1 trillion rubles ($86 billion). Much of these assets are already spoken for, Vedomosti reported.
The request from Rosneft appears to be a 180-degree shift from its attitude just after the sanctions were imposed on July 15. Three days later, Rosneft shrugged off the sanctions, saying they wouldn’t keep it from pursuing its current initiatives and reaping dividends. And on July 25, Sechin boasted that the company’s revenues were soaring and that it had been developing steps to cope with the sanctions.
If Rosneft’s reported proposal is indicative of these coping steps, though, it doesn’t appear that they’ll be successful. Vedomosti quoted one anonymous government official as saying Sechin’s plan was “horrible,” and another who said Medvedev probably would reject the proposal.
By Andy Tully of Oilprice.com