Rosneft and VTB deny financing Qatari privatisation of Russian oil major

Rosneft and VTB deny financing Qatari privatisation of Russian oil major
Rosneft CEO Igor Sechin denied state bank VTB finance the sale of a stake in his oil company
By bne IntelliNews November 15, 2018

Russia's second-largest bank state-controlled VTB did not finance the “privatisation” of a 18.93% stake in Russia's largest oil company Rosneft, “bought” by the Qatar Investment Authority, the influential head of Rosneft Igor Sechin told Dozhd news channel. 

"If [VTB] would have [financed the Rosneft-QIA], [the bank] would have the shares [of Rosneft] as collateral," Sechin said, as cited by Vedomosti daily. Previously VTB challenged the media to a bet - for every publication suggesting that QIA was credited by the bank, the media outlets would pay RUB1bn to the bank should they be proven wrong.

On November 9 Reuters said in an investigative article that VTB financed a "considerable part" of recently concluded 18.93% privatisation of Rosneft by the QIA that ended the company's murky two-year privatisation saga.

bne IntelliNews already suggested in September that VTB's spike in expensive short-term borrowings from the Central Bank of Russia (CBR) could have been linked to Rosneft deal, which VTB reportedly bridge-financed from the very beginning.

Reuters gives some of the details and showed that in September VTB increased currency loans to non-residents by RUB434bn, while simultaneously increasing liabilities to "state authorities". VTB denied crediting QIA in comments to Vedomosti daily on November 9.

Representatives of VTB argued to Vedomosti that non-resident loans (suspected QIA loan) were financed out of excess FX liquidity, while the expensive short-term borrowings from the CBR were needed to finance ruble loans, given the slow growth of retail deposits in September.

Initially the Russian government claimed that in December 2016 Rosneft had sold a 19.5% stake for €10.5bn to QHG Oil, a Singapore-registered joint venture of QIA and Swiss commodity trader Glencore. However, it later became clear that the money raised was actually a loan, with VTB reportedly crediting QHG for RUB692bn (€10.2bn) taking Rosneft's shares for collateral. Eventually, RUB692bn were transferred to the state budget as proceeds of the deal.

In 2017 Rosneft announced that a 14.16% stake was going to be sold to China’s CEFC for $9.1bn. It was billed as the biggest ever investment by a Chinese company into a Russian company, with QHG Oil theoretically recouping its investment. Unconfirmed reports claimed that VTB could finance up to €5bn for CEFC. 

However, CEFC was rocked by investigations at home in 2017, missed the April 1 deadline to pay a €1.5bn instalment, and finally dropped out of the deal in May 2018. Its stake was taken over by QIA in September, allegedly, again, with VTB's help.