By Heather Douglas
“’Curiouser and curiouser!’ cried Alice (she was so much surprised, that for the moment she quite forgot how to speak good English … Would you tell me, please, which way I ought to go from here? That depends a good deal on where you want to get to. I don’t much care where. Then it doesn’t matter which way you go.” Lewis Carroll, Alice’s Adventures in Wonderland & Through the Looking-Glass (published 1865). This is a tale about a girl named Alice falling through a rabbit hole into a fantasy world populated by peculiar, anthropomorphic creatures including a White Rabbit, Cheshire Cat, Frog-Footman and many others.
In what was one of the largest handovers of state property into private hands since President Boris Yeltsin’s perestroika reformation movement of the 1990s, the current president has sold a 19.5% stake in its giant oil company Rosneft. The signatories are known. What’s curious is who (or whom) the buyers are actually fronting for.
On the surface, the $11.3 billion (U.S.) deal, announced by President Vladimir Putin in mid-December, looks straightforward. Two companies – Swiss-based Glencore Plc and Qatar Investment Authority – will each take a 9.75% stake in the $59.17 billion Rosneft conglomerate.
Allegedly, Rosneft’s shareholders were surprised by the transaction and who the cosigners were. Most first heard about the deal at the press conference jointly conducted by Igor Sechin, the company’s executive chairman and President Putin himself who stated, “It is the largest privatization deal, the largest sale and acquisition in the global oil and gas sector in 2016.”
Commodities trader Glencore reported it would pay its initial three per cent in euros and the rest through bank financing and an injection of cash from its partner, the Qatari sovereign wealth fund. In return, the company gets another 220 thousand barrels a day of Ural oil, for the next five years, to barter. Reuters reported that about half of Glencore’s financing was coming from Intesa SanPaolo, an Italian institution regarded in banking circles as “a good friend of Putin and his various projects.”
Presumably, the Qataris will pay their share in cash. This chess move further solidifies the middle-eastern fund as a major investor in international, blue-chip companies. It already holds stakes in Volkswagen and Credit Suisse.
The Kremlin’s coffers are low — due to the European and American sanctions imposed when Russia annexed Crimea from the Ukraine and the 2014-2016 oil price crash staged by the Saudis. The country’s budget is based on oil prices of $40 (U.S.) per barrel and consequently and has run up a heftier deficit than anticipated.
The economic and trade sanctions levied by the EU and US against some Russian companies and banks were imposed in September, 2014. Some were intentionally enacted to deliberately prevent energy producers from raising financing to expand that sector.
It gets curiouser.
According to investigators from the European Union, who are suspicious of the transaction, important facts about the deal either have not been disclosed, cannot be determined solely from public records, or “appear to contradict the straightforward official account of the stake being split 50/50 by Glencore and the Qataris.” In addition, they add, “public records show the ownership structure of the stake ultimately includes a Cayman Islands company whose beneficial owners cannot be traced.”
“The main question in relation to this transaction still sounds like this,” wrote Sergey Aleksashenko, a former deputy head of Russia’s central bank, in a blog posting in late January, “who is the real buyer of a 19.5% stake in Rosneft?”
And curiouser.
Russia and Qatar have supported different sides in the ongoing, brutal Syrian conflict – Russia firmly on the side of President Bashar al-Assad and the Shias, while Qatar sided with the Saudis and the United States, backing the Sunnis.
Yet in a strange, anthropomorphic way, the Qataris and the Russians, both huge natural gas producers, may have good reason to cooperate on the oil file. Some Middle Eastern watchers believe that as Russia’s influence rises in the region, the Qataris wanted to build a solid relationship with the Kremlin.
In January, Tammin bin Hamad Al Thani, the Emir of Qatar, visited Moscow and had a two-hour, in-camera visit with Putin. The Emir has made no secret of his desire to sell gas to Europe through a proposed pipeline through Syria and Putin wants cordial relations with the Gulf States.
Other observers are quietly putting bets that this deal seals Putin’s already lucrative retirement savings plan. If, during the next five years, Rosneft’s shares crater, the banks could foreclose on Glencore, and sell it to third parties, who may or may not be involved with Intesa and unnamed Russian banks.
These murky dealings might necessitate a demand that Qatar sells its stake. After all, consortium contracts often include opt-out clauses, so any party can be forced to sell its stake if the ownership structure changed. Would it be improbable for those funds to end up in unnamed bank accounts?
It’s not impossible to believe the Russian president could end up with a full 19.5% ownership of Rosneft.
“Would you tell me, please, which way I ought to go from here? Alice asked. That depends a good deal on where you want to get to. I don’t much care where. Then it doesn’t matter which way you go.”
#Putin #Russia #USA #Glencore #Oil
