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China’s investigation into CEFC started after the Chinese conglomerate had already paid a first tranche of its US$9-billion acquisition of 14 percent in Russian oil giant Rosneft, suspending the deal in its tracks, Reuters reported on Thursday, quoting three sources close to the issue.
CEFC is buying the stake in the Russian state-controlled oil firm from Glencore and the Qatar Investment Authority (QIA) in what is seen as a boost to the energy ties between Russia and China.
Last month, one of the sellers of the Rosneft stake, Glencore, said in its 2017 results release that the deal, “subject to customary regulatory approval processes, is expected to complete in H1 2018.”
But since CEFC announced in September that it would be buying into Rosneft, the mystery over the Chinese company has deepened, and earlier this month Chinese authorities started investigating the chief executive of CEFC China Energy, Ye Jianming, on suspicion of economic crimes. The investigation is part of a wider crackdown on private Chinese businesses after President Xi Jinping’s government warned that no Chinese billionaire, no matter how well-connected, is safe from scrutiny and investigation.
The probe into CEFC and its chairman, who is reportedly stepping down, is now impeding the US$9-billion Chinese acquisition of the stake in the biggest Russian oil producer.
According to Reuters’s sources who declined to say how much the Chinese firm had paid for the deal so far, the fact that money was transferred would make it harder for any of the parties to withdraw from the transaction.
After the investigation into CEFC surfaced, Rosneft representatives traveled to China to seek clarification about the deal, but the Chinese party “has just vanished”, one source told Reuters.
Another source said that it was not clear how the CEFC-Rosneft deal would proceed from now on, but that it was clear that China and Russia want to strengthen their energy relations.
“One thing is clear though. The Kremlin wants China to own a stake in Rosneft. And China has long said it wants to boost Russian energy ties,” the source told Reuters.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.