Rosneft Scam

It is now pretty clear that some kind of scam is being perpetuated with the Rosneft “privatization” in order to avoid Western sanctions.

Dmitry Gudkov writes on Facebook:

It seems that Igor Ivanovich Sechin is not telling us something. The triumphant sale of Rosneft shares to Glencore and Qatar’s sovereign fund no longer appears so triumphal. The trader claims that rather than billions, it’s contribution will be limited to a modest 300 million euros.

And as for Intesa, the head, Antonio Fallico “…is openly called “Putin’s man” in Italy.”

In an interview in late 2014 with RT, Fallico openly stated that the “EU sanctions against Russia are suicide”.

Intesa was also the organizer of the sale of Rosneft’s shares.

Gudkov sites an article in Finanz.ru:

A source told Finanz.ru that “Glencore and the Qatar Fund appear to be a ‘cover’ in the deal.” The scheme may work as follows: Rosneft issues bonds and invests cash in a certain fund, which then buys its shares and gets a commission, similar to the mechanisms used for privatization in Russia in the 1990s.

That is Rosneft took the approximately $9.42 billion that they made off the bond auction last week, and that money was then used to buy Rosneft’s own shares. But it was done in such a way so as to avoid any problems with the sanctions regime.

Alfred Kokh replied to Gudkov’s post, suggesting that it may have been something along the lines of a managerial buyout. Usually, in such cases the managers have no ready capital, and so have to take loans from banks to make their purchase. But Kokh noted that in the 1990s Lukoil and others made no secret of what they were doing. So why, he asks, is Sechin hiding something?

Meanwhile, Vladimir Milov, who has written about Rosneft quite a bit recently, wrote in Forbes Russia: “…that it was possible that Rosneft is turning over some of its shares in payment of its bonds placed for 600 billion rubles. Rosneft received pre-payments from Glencore in 2013-2015 of up to $5 billion for future deliveries, he noted. Therefore, the sale of the bonds would cover Rosneft’s debts to Glencore but would be sent to the Russian budget as if “new money.” Milov also noted that Qatar owns 9% of Glencore.”

What likely happened is that Rosneft either couldn’t or wouldn’t spend their own money to buy the shares, so some way was needed to get more capital. But because of the sanctions that was problematic. I have written before about the company’s money woes. In addition, numerous analysts have stated concern about the effect Rosneft’s purchase of its own shares would have had on the ruble. So this was the best way they could come up with to skirt the sanctions and get capital.

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