Vladimir Milov tweeted today:
The total debt of our oil and gas companies (Rosneft, Novatek, Transneft, Gazprom) to the Chinese: a shocking $70 billion
He linked to his blog, where he wrote:
…$45 billion belongs only to Rosneft, however it is not the only one who owes the Chinese. Together, our four major oil companies – Rosneft, Gazprom, Transneft, and Novatek – already owe the Chinese 4.4 trillion rubles, or more than $70 billion at current exchange rates.
For comparison, Milov noted, the debt of the four largest Russian oil and gas companies to the Chinese is “almost three times higher than the IMF loans [to Russia] in the 1990s”.
He then breaks down the debts owed by each company:
- The company owes the China Development Bank $15 billion, and a further $30 billion in advance oil supplies [to CNPC, I believe – ed]. That is, as Bloomberg wrote back in January:
Prepayment contracts, where producers get cash up front in return for a promise to repay with physical oil in the future, provide the Russian state-controlled company with alternative financing while guaranteeing flows of often discounted crude to customers.
- 42 billion rubles to the Chinese Silk Road Fund.
- Its subsidiary “Yamal LNG” recently took loans from China Development Bank and China Exim Bank for 9.3 billion euros and 9.8 billion yuan, respectively. Their total debt to the Chinese is 756 billion rubles at the current rate.
- 557 billion rubles to China Development Bank at the current rate.
- The company owes the least of the four companies, but still owes 242 billion rubles to the Bank of China Ltd London Branch, and China Construction Bank.
Is $70 billion debt to China a lot or a little? Milov asks rhetorically.
In the last 10-15 years Russia got trillions of dollars in revenue from the ultra high oil and gas prices, but in the end our oil and gas companies found themselves in debt to China, which in fact is the largest importer of oil and gas.
In general, it turned out, because our companies have spent too much money on the absorption of foreign assets and accumulated debts for which it was necessary to pay off loans from the Chinese, and also because our authorities have started a war against Ukraine, for which Russia is now under financial sanctions, and besides the Chinese, nobody wants to loan Russia money.
To understand the scale:
- $70 billion of debt to the Chinese by the oil and gas companies is more than the annual net profit of the four companies (the four received a total of 1.4 trillion rubles of net profit in 2015, while the Chinese are owed 4.4 trillion). That is, four of our largest oil and gas companies need to work more than 3 years without profit, not invest, not pay dividends, and so on in order to repay their debts.
- $70 billion of debt to the Chinese oil and gas companies is a fifth (20%) of all foreign loans to Russian corporations ($350 billion according to Russia’s Central Bank).
And that is not the end of the story, as these companies are in talks with Chinese banks on all new loans.
I note that if world oil prices do not return for a long time to high values (and apparently they will not return), then at some point the problem of the impact of oil debt to China will become very acute.