Russia seeks IndiaChina Rosneft deal

Russia is seeking buyers for 19.5% of state oil behemoth Rosneft

RUSSIA is seeking buyers for 19.5% of state oil firm Rosneft and would prefer a joint deal with India and China, two people familiar with the matter said, reports Bloomberg. Officials in Moscow expect to raise at least 700 billion roubles ($11 billion) from the sale. China and India have both publicly expressed interest in the Rosneft sale, which would cement their footholds inside the world’s largest energy exporter.

VLADIMIR Putin is considering selling part of Russia’s corporate crown jewels to China and India as the president struggles to meet spending commitments before his possible re-election bid in less than two years.

Russia is seeking buyers for 19.5% of state oil champion Rosneft and would prefer a joint deal with the two nations leading the growth in global energy demand, two people familiar with the matter said. Officials in Moscow expect to raise at least 700 billion rubles ($11 billion) from the sale, which would set a privatisation record for the country. Bringing two of Asia’s three largest economies into Rosneft, which pumps more crude than Exxon Mobil, would help Putin cover budget shortfalls while strengthening his geopolitical hand at a time when conflicts in Ukraine and Syria have driven relations with the US and Europe to a post-Cold War low. It would also balance the near 20% stake held by London-based BP, the bulk of which was acquired in 2013 before Putin stoked a separatist rebellion in neighboring Ukraine by annexing Crimea.

“This would be a logical choice,” said Vladimir Tikhomirov, chief economist at BCS Financial Group, a Moscow brokerage. “India and China aim to boost ties with Russia, while Russia’s options for investors in Rosneft are quite narrow.” China and India have both publicly expressed interest in the Rosneft sale, which would cement their footholds inside the world’s largest energy exporter, although neither side has said whether a joint deal is being considered. On Friday, Indian Oil Minister Dharmendra Pradhan said one couldn’t be ruled out.

“We are not rivals,” Pradhan said in an interview at Putin’s annual economic forum in St. Petersburg, adding that India’ s Oil & Natural Gas Corporation and China National Petroleum Corporation already have joint projects and more “would be nice.”

Rosneft shares rose 3% in London, adding to a gain of 5.3% on Friday and boosting its market value to $54.4 billion. The stock has gained more than 47% this year.

Russia’s energy strategy tilted towards Asia after western penalties over Ukraine curbed access to funding and demand in Europe flatlined even as prices tumbled. The focus so far has been on boosting oil and gas supplies to China, the region’s largest market and a pivotal financier for Rosneft, whose ability to tap international capital markets is restricted by sanctions. CNPC, based in Beijing, said in April it was studying the possibility of participating in the privatisation, but didn’t elaborate.

China has provided Rosneft and other Russian energy companies with more than $100 billion in loans and prepayments for supplies over the past decade, money that helped fund the acquisitions that turned the staterun company into the world’s largest publicly traded oil producer by output three years ago.

While Russia’s oil trade with India, by contrast, has been minimal, that’s starting to change now that the country is replacing China as the center of global growth. The International Energy Agency predicts India, the fastest-growing major economy, will consume 4.2 million barrels a day this year, surpassing Japan’s 4.1 million, and use an additional 6 million a day by 2040, compared with 4.8 million barrels a day more for China.

Bloomberg