Glencore, Qatar jointly buy $11bn Rosneft stake

A YEAR ago Ivan Glasenberg was fighting to save his firm from short sellers. Today, the chief executive of Glencore is doing what made his reputation: cutting deals that shake up global commodity markets.

Making a big bet on the battered oil industry and Russia, Glencore and Qatar’s sovereign wealth fund joined forces to buy an $11billion (R151bn) stake in Rosneft, the Kremlin-run oil producer.

Although Glasenberg is only committing $300million of Glencore’s money to the proposed deal his company will be closely entwined with Rosneft, built and run by Putin’s longtime ally Igor Sechin. As part of the deal, Glencore will get to sell 220000 barrels a day of Rosneft oil for five years and it is unlikely to end there.

Glencore expects “additional opportunities, through a strategic partnership for further co-operation, including infrastructure, logistics and global trading”, it said.

While Glencore is the world’s second-largest independent oil trader, it does not produce much crude. Its oil trading unit has been less high profile than the metals and coal business, where Glasenberg made the company a huge producer through the $43bn acquisition of Xstrata in 2013.

It has not made investments of a similar scale in oil and gas. Until Wednesday, the biggest was the acquisition of Caracal Energy for $1.4bn in 2014.

That ended badly when collapsing oil prices forced Glencore to write down the value of the purchase.

The Rosneft announcement signals the ascendance of oil chief Alex Beard. Until now Beard has been overshadowed by metal traders such as Telis Mistakidis and Daniel Mate.

Huge victory “The deal is a huge victory for (Russian President Vladmir) Putin, bringing much needed revenue to the cash-strapped Russian government despite western sanctions and allowing Rosneft to expand its footprint in the global oil market by partnering with one of the world’s major oil trading firms,” said Jason Bordoff, a professor at Columbia University’s School of International and Public Affairs.

As well as shifting Glencore toward oil, the deal is also a huge bet on Russia and its leader. The company has long had ties with the natural resources world in Russia.

The commodities trader also owns a 25percent stake in Russneft, the country’s seventh-largest oil producer by output. Glasenberg himself has kept close to Russian leaders, attending the St Petersburg annual business forum and travelling regularly to Moscow.

The latest move also shows Glasenberg’s confidence in Glencore’s recovery.

Last year, the company’s share price collapsed as investors challenged the ability to service its debt in a weak commodities market. After raising cash from investors, selling assets and idling mines, Glencore was able to reinstate dividend payments last month. – Bloomberg