Rosneft Privatization: Reality or Fraud?

Sull’operazione Rosneft-Glencore-Qia che ha visto intervenire Intesa Sanpaolo come finanziatrice di Glencore e Qia riportiamo sotto questo recente commento di Anders Aslund, comparso su La notizia circa la finalizzazione del finanziamento è la seguente: “Intesa Sanpaolo supporta con un finanziamento fino a un massimo di 5,2 mld di euro il consorzio di investitori internazionali per l’acquisizione del 19,5% del capitale di Rosneft. Lo rende noto un portavoce del gruppo bancario in relazione al perfezionamento dell’accordo fra Glencore e Qatar Investment Authority (Qia) per l’acquisizione del 19,5% di Rosneft. Intesa Sanpaolo con questo finanziamento – nel rispetto delle normative internazionali e dopo il via libera di fatto delle autorità competenti (fra cui il Ministero del Tesoro) – supporta e consolida la relazione con due grandi players internazionali, nell’ambito di un’operazione di alto profilo e significativa redditività nonché di rilevanza per i mercati finanziari internazionali. Il finanziamento, che sarà oggetto di sindacazione, spiega il portavoce di Intesa SanPaolo, è coperto da un robusto pacchetto di garanzie”. 

Rosneft Privatization: Reality or Fraud?

Is there real money anywhere?

di Anders Aslund

On December 7, the Russian official news agency TASS reported that President Putin’s press secretary, Dmitry Peskov, said that 19.5% of Rosneft’s shares had been sold to “a consortium of Glencore and Qatar’s sovereign fund.” Sechin claimed: “This amounts to over 1 trillion rubles, which will come to the budget, including 10.5 billion euros for Rosneft’s 19% stake.”

President Putin concurred: “It is the largest privatization deal, the largest sale and acquisition in the global oil and gas sector in 2016.” He continued: “Mr Sechin, I would like to congratulate you on the conclusion of a privatization deal to sell a large stake in our leading oil and gas company Rosneft: 19.5%.”

We all know that official Kremlin statements may deserve some scrutiny, so let us check.

The first correction concerns the total amount. Financial Times (December 17) clarified that the total amount was not €10.5bn but €10.2bn. Let us continue.

Glencore has been on the verge of bankruptcy for the last one and a half years, being seriously overleveraged. It declared taking a mere holding of €300 million, which is not 50% but only % of €10.2bn, as confirmed by Russian Business Consulting (RBC).

So where did the rest of the money come from? We all know that Qatar has far too much money, but according to the Financial Times, it offered only €2.5bn. That leaves €7.4bn unaccounted for.

The rest was supposedly to be delivered by a bank consortium led by the biggest Italian bank Intesa Sanpaolo. RBC claims that “more than” €3.7bn would come from Intesa Sanpaolo, and “less than” €3.7bn Gazprombank and other (Russian) banks.

Suddenly, the question arises: Is there real money anywhere? The key is probably given by Reuters, when noticing, “Rosneft this week placed $9.4 billion in domestic rouble bonds.” Reuters does not say so, but good sources claim that these bonds were bought by the Central Bank of Russia, that is, the Russian state. Reuters did record one government source which said that “the bond issue was a safety net in case the negotiations with the outside investors fell through.”

Perhaps that was the whole story! Suddenly, it all becomes clear. Rosneft CEO Sechin manage to mobilize $9.4 billion on the state-dominated Russian domestic financial market, and he transfered that money to a number of Russian and foreign banks which assisted him in “buying” shares form the state corporation Rosneft which he manages.

The deeper one digs, the murkier things gets. Gazprombank is neither a state company, nor a subsidiary of Gazprom, as it once was. For a minor payment, it has been transferred to the ownership of Bank Rossiya, which has been sanctioned by the United States for being a crony bank of the Putin group.

The money from Qatar may be real, but the rest is likely to be either Russian state money, or Russian state-related money. Glencore clarified that it would obtain preferential access to Rosneft oil exports, so its notional “€300 million” can probably be disregarded as a trading discount.

The serious legal question is regarding the impact of Western sanctions on this deal. The Financial Times announced that the New York Department of financial Services had fined Intesa Sanpaolo for $235 million for violating anti-money laundering, and bank secrecy laws.

The bigger question is whether the U.S. Treasury can penalize Intesa Sanpaolo for having violated the U.S. sanction regime against Russia. The privatization of Rosneft represents an attempt to escape the U.S. financial sanctions of July 2014 against Russia because of its war in Eastern Ukraine by two means. The U.S. presidential executive order on financial sanctions prohibit Russian Initial Public Offerings, but this would be a sale of existing stocks, not an issue of new stocks.

Furthermore, both Rosneft, and its CEO Igor Sechin, are sanctioned by the United States, but the state-owned holding company Rosneftegaz that formally owns Rosneft is not. Needless to say, this appears as an operation to avoid U.S. sanctions.

If this had happened before the November presidential elections, the White House would in all likelihood have struck down this transaction in one way or the other, but now the U.S. president is a lame duck.

President Putin did focus publicly on what was in it for the state, asking surprisingly directly: “when will the money come to the Russian budget?” Sechin’s answer, by contrast, was rather vague: “I am sure that the high standards of our investors and Rosneft’s transition to a new dividend payment system, which the Government has approved at 35%, will definitely improve the company’s capitalization, including the state-owned stake. We estimate the state-owned stake after the transaction at approximately 80 billion rubles.” But that is only $1.3 billion. Apparently the rest of the money disappeared, which presumably was the aim. We may guess who they beneficiaries may be.

Rather than a great privatization, the transfer of shares from Rosneft to unknown beneficiaries was a major transaction in the Kremlin-related group not likely to benefit the Russian state.