Glencore rivals envy Rosneft sale

GLENCORE’S move last week to sell most of its stake in Russian oil major Rosneft to Chinese conglomerate CEFC is eliciting admiration from the Swiss oil trader’s rivals – and relief from its bankers.

To rivals, it appears to be a clever deal by Glencore’s boss Ivan Glasenberg, who had initially invested €300 million (R4.65 billion) of Glencore’s money in a deal worth €10.2bn.

On paper, after nine months he shows a small loss: Glencore retains a 0.5 percent equity stake in Rosneft, now worth around €250m.

Benefit

But crucially, traders expect Glencore to hold on to the most valuable benefit of the deal: an agreement to let his firm sell hundreds of millions of barrels of Russian oil to global markets over five years. “It is a very sweet deal. I wouldn’t hesitate to pay three times what Glencore paid to get those volumes,” said a trader with a rival.

For Glencore’s bankers, the relief comes from unwinding the original deal, Russia’s biggest privatisation since the 1990s, under which Glencore and Qatari sovereign wealth fund QIA bought nearly a fifth of Rosneft through a structure of offshore holding companies funded mostly by debt.

When that deal was reached in December, participants did not fully disclose the beneficiaries of their offshore investment vehicle to the public, or explain which Russian banks were among those providing loans. – Reuters