Realist, not conformist analysis of the latest financial, business and political news

Of Course A State Bank Financed The Rosneft Deal – No One Else Was That Stupid

Reuters has a nice little story today, insisting that it was a State bank, VTB, that financed the privatisation of a chunk of Rosneft. The answer to which is yes, obviously, for no one else was stupid enough to throw money at Igor Sechin’s little baby. What we’ve got today is confirmation of exactly who it was within the oligarchy who financed the deal rather than the new information that it was someone within said oligarchic state which did.

Sure, the who is interesting, but we already knew it had happened:

“I want to congratulate you”, Russian President Vladimir Putin told his trusted ally Igor Sechin, after greeting him with a warm handshake in the Kremlin in December, 2016.

Sechin had just announced the sale to Qatar’s sovereign wealth fund and giant commodity trader Glencore of a 19.5 percent stake in Rosneft, the state oil giant that he runs.

The 10.2 billion euro ($11.57 billion) privatization deal was designed to replenish Russia’s coffers, depleted by falling energy prices and Western sanctions.

Some Russian officials hailed it as proof that despite growing political isolation from the West the country could still attract global investors.

But now, nearly two years after the sale was first announced, nine sources with knowledge of the transaction have told Reuters that VTB, a Russian state-owned bank, itself financed a large share of the acquisition, undermining the deal’s stated aim to bring foreign money into the country.

Based on accounts from five of the sources, the value of the Russian loan to the Qatari sovereign wealth fund is around $6 billion.

Qatar seems to have form on that. There was a rumour – squelched of course, as the SFO didn’t pursue charges in the end – that perhaps their purchase of Barclay’s stock was equally interestingly financed. It wasn’t, as we know, but here we’ve the same allegation at least.

As to us knowing, well, no one else wanted to buy a piece of Rosneft. Even those who do business with it didn’t want the equity.

The Rosneft “privatization” has been opaque since day one. And no surprise, as it involves a convergence of the most opaque entities on the planet: Russia, China–specifically a virtually unknown Chinese conglomerate with apparent ties to the Chinese security apparatus–Middle East investors, and a Swiss commodities firm. Have them walk into a bar, and you have the beginnings of a great joke. Put all these together, and you get a black hole from which no light can possibly emerge.


Remember when the Russian government said it was going to privatize a piece of Rosneft? Hahahaha. That is so 2016–please try to keep up! In its announcement of “Rosneft 2022” the company proposes to buy back about $2 billion in shares, which is just about 20 percent of the piece sold off in 2016–no, wait–2017–no, wait–2018. Adding even more hilarity is that the buyback plan was apparently at the insistence of Qatar, the last buyer standing which agreed to buy most of the shares initially privatized, much to the relief of the banks (Intesa and unnamed Russian ones) who were wearing a big piece of the risk.

I’m guessing that this was one of the terms Qatar laid down to absorb the entire hand-me-down stake for the original 2016 price, even though in Euro terms Rosneft’s shares are substantially lower today (despite a rallying oil price!)


To make things even more dicey, in January VTB announced it was “ready to” loan CEFC the money to finance the deal. Presumably some of this money flowed, and is the source of the funds that have already been paid out.

Yep, we did even know which bank was doing the financing.

Just as a bit of background I’d point out that I worked a decade in Russian commodities. OK, weird metals instead of oil, a small enough market that none of the big boys were interested in muscling in but seriously, this is very small beer by the standards of the place and industry. A bit of loaning money to a buyer of stock? Tchah! One guy in my industry, rare earths, had his head shot off while sitting in an airport over the ownership of stock. In my wife’s business (importing the western newspapers) one customer assassinated another one. Well, allegedly but no one at all thinks it was anyone else. Concerning the ownership of a hotel. At least these days they’re doing it with money, right?

0 0 votes
Article Rating
Notify of

Inline Feedbacks
View all comments
Would love your thoughts, please comment.x