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Kremlin Bans Any Internal Rosneft Shareholder Deals Before Privatization

The Kremlin has banned Rosneft’s shareholders from closing deals among themselves before the privatization of as much as 20 percent in the state giant goes through, which may not take place this year, according to Economy Minister Alexey Ulyukaev.

The ban is most likely targeting BP, which is the only non-Russian big shareholder in the company with a 19.75-percent interest. The government owns 69.50 percent via Rosneftegaz, a state-owned company, and the National Settlement Depository holds 10.36 percent.

The stake sale has been prompted by the gaping deficit in Russia’s budget, caused by the persistently low oil prices. This year, the deficit is estimated to reach 4 percent of GDP, equal to around 1.5 trillion rubles, or some US$23 billion. The proceeds from the Rosneft privatization are seen at around US$10.5 billion.

The government is concerned, apparently, that BP could strike a deal with any of the prospective buyers to increase its control in the company and be able to block government decisions. Or, as analysts from Aton Capital said in a note, “We believe it wishes to avoid BP and the new strategic investor combining their efforts to oppose the government’s decisions. While this clause might dent the attractiveness of Rosneft’s stake to some extent, we deem the news neutral for Rosneft shares.”

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This is the latest in a series of restrictions imposed by the Kremlin on different aspects of the future sale. These include a lock-up period of three years, an obligation for the successful buyer to vote for government officials that have been proposed to sit on the board of directors, and the absence of any pending debts or tax dues to the Russian budget.

The Rosneft stake sale is part of a wider privatization drive, including some of the largest state-owned businesses in the country, such as Alrosa’ the world’s largest diamond miner. A 10-percent stake in the company recently went for 52.2 billion rubles (US$804 mln).

By Irina Slav for Oilprice.com

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