Russia ‘privatises 19.5% of oil giant Rosneft’

THE Kremlin on Wednesday said that Russia had finalised a deal to privatise 19.5 percent of state-owned oil giant Rosneft, in the largest deal of its kind this year, as the country pushes to reduce its daunting debt mountain.

Rosneft chief Igor Sechin informed President Vladimir Putin “about the completion of a privatisation deal of 19.5 percent of shares of the largest Russian oil company Rosneft”, Kremlin spokesman Dmitry Peskov told reporters.

He added that its investors were the Swiss commodities giant Glencore Consortium and Qatar’s sovereign fund and that the move would contribute 10.5 billion to the budget as the country’s struggles with enduring economic woes.

The move, which Putin hailed as the largest privatisation deal in the global energy sector in 2016, also comes as oil prices have soared to more than $50 a barrel after OPEC members last week hammered out a deal to cut oil output for the first time in eight years.

“The transaction was made on an upward trend in oil prices and reflects on the value of the company,” Putin said in a meeting with Sechin broadcast on state television. “In that sense this is a good time.”

Putin stressed that the controlling stake in the company would remain in the hands of the Russian government, which controls over 50 percent of shares.

He called on Rosneft, the Finance Ministry and the cen- tral bank to ensure that the deal will not destabilise the country’s financial market.

Sechin told Putin that Rosneft had taken part in talks with “more than 30 companies, funds, professional investors, sovereign funds, financial institutions from countries in Europe, the Americas, the Middle East and the Asia-Pacific region” ahead of the deal.

Bashneft deal

Glencore said the deal “will be conditional on the subsequent finalisation of all relevant financing, guarantee and other agreements”, and could be closed in mid-December.

The statement added that its five-year offtake agreement with Rosneft represents “a sizeable additional 220,000 barrels per day” for the company.

Once a little-known firm, Russia’s Rosneft has enjoyed a meteoric rise under Putin.

Headed by the Kremlin strongman’s powerful ally Sechin, it has scooped up some of the most prized assets in the Russian oil sector in a series of controversial deals.

Last month the company reported an unexpected collapse in profits in the third quarter, citing the difficult situation on the commodity markets and export duties.

The company in October faced down opposition from some in the government and bought a majority stake in Bashneft oil producer which had been held by the state.

Economy Minister Alexei Ulyukayev was sacked last month and put under house arrest on suspicion of pocketing a $2 million bribe to allegedly greenlight Rosneft’s move to acqu i re a major it y state in Bashnef t in a dea l wort h $5.2 billion.

Russia – which is not a member of OPEC – has said it is ready to reduce crude output by 300,000 barrels a day in the first half of next year.

OPEC and non-OPEC members are set to meet in Vienna on Saturday to discuss the implementation of the deal to slash output.

Experts predict that if oil prices remain higher than expected, the Russian government will use the opportunity to increase spending ahead of the 2018 elections instead of reducing its deficit.