Russia Sells 19.5% of Its Rosneft State Oil Company For $10.5 Billion

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Russia Sells 19.5% of Its Rosneft State Oil Company For $10.5 Billion

(AFP Photo/Dmitry Kostyukov)

Written by Alexander Mercouris; Originally appeared at TheDuran

Russia’s successful sale of 19.5% of the shares of the state oil company Rosneft for $10.5 billion to the international oil trader Glencore and to the sovereign wealth fund of Qatar is another blow to Western sanctions and a vote of confidence in Russia’s economy.

Defying the predictions of some Western analysts, and despite sanctions, Russia has pulled off another coup, successfully selling for $10.5 billion a 19.5% stake in the state owned oil company Rosneft.

The buyers are Glencore Plc – a major oil trader, which has ambitions to re-establish itself as the dominant international trader of Russian oil – and Qatar’s sovereign wealth fund.

The sale of a stake in Rosneft has not been uncontroversial with some people, with some fearing – or hoping – that it is a rerun of the sort of privatisations which took place in Russia in the 1990s.

As I have discussed previously, Russian President Putin is in reality no privatisation fanatic, and in the case of Rosneft – as he pointedly reminded Igor Sechin, Rosneft’s CEO, when they met to discuss this latest deal yesterday – the Russian government retains overall control with a more than 50% stake.  I previously discussed Putin’s views of privatisation here

“Putin’s views on the vexed issue of privatisation also seem to be very similar to those of his ministers.

He is broadly sympathetic to the idea and has shown no wish to reverse the privatisations of the 1990s.  However – to the exasperation of many in the Western investment community – he is no privatisation fanatic and clearly feels the government has a continued role to play in the direct management of key enterprises crucial to the economy.   

Though he welcomes foreign investment in Russia he is clearly determined to keep key sectors such as energy, banking, national infrastructure and key enterprises important to the defence sector under Russian control.”   

The sale of the shares in Rosneft should rather be seen as a revenue raising measure for the Russian budget at a time when the budget is in deficit because oil prices are low, but also as a means to forge strategic commercial alliances with companies like Glencore and with sovereign wealth funds of countries like Qatar.

The fact that Glencore and Qatar’s sovereign wealth fund have bought a stake in Rosneft is first and foremost a vote of confidence in Russia and in its economy. 

In the case of Qatar, it also aligns its interests as an energy exporter with those of Russia.  There is a widely held view that the origin of the Syrian war was a US-EU-Qatari plot to build oil and gas pipelines from Qatar across Syria to loosen European dependence on energy supplies from Russia.  Whether or not that is true (and I have my doubts) Qatar’s purchase of a block of shares in Rosneft shows that in energy matters Russia and Qatar may at times be competitors but at other times they are also partners.

The successful sale of shares in Rosneft is a boost for the Russian budget, and as a vote of confidence in the Russian economy by the international investment community it is also a political boost for President Putin and for the Russian government.

It is also an important boost for Igor Sechin and Rosneft, which have not only acquired two valuable strategic partners in Glencore and Qatar, but who through their recent purchase of Bashneft have further advanced their strategy to position Rosneft not just as Russia’s leading oil company, but also as one of the leading oil companies of the world.

It is also a reflection of something else.  When the sale of the Rosneft shares was originally announced some months ago the international financial commentariat – both Western and Russian – generally predicted its failure.  This is in line with its invariable pessimism on any subject which touches on Russia’s economy.

As with Russia’s successful sale of Eurobonds this year (see here and here) the successful sale of the Rosneft shares shows that the market assesses Russia quite differently from the way the international financial commentariat does.  If the commentariat wants to retain its credibility in the market on questions concerning Russia, it might care to take note of the fact.

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  • Byzantines

    To Qatar ?Putin and Russia elite will sell even their mothers to the devil in order to have access to west life style .In meantime in order to make a operation or to study in the Russia must to pay,thanks to neoliberal Putin economic policy.

  • Drinas

    So..Selling russian national property to Qatar, the same Qatar that is funding ISIS, is in the perverted logic of the author a great success?
    It seems that the neoliberals never left the scene in Russia despite all the joyous years back in the 90s..Shamefull

  • Igor Ochocinszk

    YELTSIN CRONIES! selling out Russia to wahhabi jihadi madmen headchoppers! Better to do business with other european countries or eastern asia than with them.

  • Hunter1324

    Are they… striking a deal with Qatar in exchange for the Gas pipeline?

    • Byzantines

      And with the rescue of Qatar backing terrorists in Aleppo.

  • Byzantines

    .
    Many reviewers have no idea about how works the Russian elite and its representatives in Russia administration.for this reason, when you write the true ,that is not so popular.They prefer emotionally comments favor to Putin,They trapped from anti-Putin west fool propaganda,.This is an antagonistic propaganda of elites . Putin is the newest liberal leader right now ,never was against the west financial system ,just wants to manage it together with partners.The Rosneft deal relates with recently a Lavrov-Kerry agreement for Aleppo and the mission of Salafites

  • wimroffel

    The oil price is low and so the Rosneft share prices are rather low too. So selling at this moment signals either a desperate need for money or a lack of trust that the oil price will rise further. Or it is – as Mercouris suggests – some kind of political maneuver.

    • Byzantines

      You remind me the communists in the 80 ties who tried very hard to excuse the betrayal of Gorbatjov and his perestroika.

  • Kire Stojanovski

    A very disappointing move, money from the Russian oil is going to the hands of terrorists in Syria who are killing Russians, 22 being killed already. Very disappointing!

  • AMHants

    In the case of Qatar, it also aligns its interests as an energy exporter with those of Russia. There is a widely held view that the origin of the Syrian war was a US-EU-Qatari plot to build oil and gas pipelines from Qatar across Syria to loosen European dependence on energy supplies from Russia. Whether or not that is true (and I have my doubts) Qatar’s purchase of a block of shares in Rosneft shows that in energy matters Russia and Qatar may at times be competitors but at other times they are also partners.

    This actually interests me, because is it a way of solving things in Syria. Bearing in mind, Qatar to Europe Pipeline deal, will not be able to achieve it’s aims, with regards taking the natural resources of Syria, owing to the legal Syrian Government and Russia sorting out the Syrian invaders? Does this mean, that Qatar will back off from the Qatar to Europe Pipeline deal. Or will they cause problems for Russia, in some form of Trojan Horse position? A genuine question, if anybody has any take on the position.

  • Igor Dano

    which idiot decided to sell rosneft shares?
    kill him.

  • Marek Pejović

    well, for 10bn dollars you also get political alignment with influential lobbyist groups in the west, who now want to maximize their profits from (your) oil company. not bad.

  • Catfish

    This deal could have been part of an agreement to cut the qatari in on a non controlling share of rosneft to get them to back off supporting the terrorist groups in Syria some. That also gave Russia more funds to work with in areas it’s needed. Russia hasn’t gone pro wahabi or sold out to qatar imho but is probably negotiating with them in its polite pragmatic manner.