Chinese authorities are investigating the chief executive of CEFC China Energy, Ye Jianming, on suspicion of economic crimes, an unnamed source told Reuters. The information also appeared in Chinese magazine Caixin.
CEFC last year struck a deal to buy a 14.16-percent interest in Russia's Rosneft for more than US$9 billion. At the time, the news raised quite a few eyebrows as the more logical candidate for a hefty stake in such a large company would be a state oil and gas player.
Yet CEFC, it appeared, had Beijing's favor. The company is the largest private energy business in China and has been investing heavily both at home and abroad, including projects in Central Asia, Eastern Europe, and the Middle East. At home, the company has been buying and building oil storage capacity. CEFC has even been entrusted with storing part of China's strategic petroleum reserve. Besides its energy business, CEFC is also active in financial services and online insurance.
Could this favor now be taken away? There is always such a possibility. The questioning of Ye Jianming could be part of a wider crackdown on illicit business practices that earlier this year saw the state take control of insurance company Anbang, which Reuters' Clara Ferreira-Marques called "recklessly ambitious."
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Nobody seems certain how things will develop and nobody has any certainty that a company that is today close to the government won't attract regulator's attention tomorrow. This seems to be the general sentiment among foreign investors with interests in China as President Xi Jinping consolidates his power. The message of the crackdown is clear: business must be kept in line, and this is apparently valid regardless of how well connected certain companies are in the state.
Two entities that should be particularly worried about the reported probe of CEFC's boss are Glencore and the Qatar Investment Authority: they were the ones that agreed to sell their Rosneft stake to CEFC, and the deal has not yet been completed.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More