News Column

Rosneft seeks $42bn as loan

August 24, 2014

MOSCOW:



Russia's Rosneft, which produces more oil than Iraq or Iran, is seeking a $42 billion loan from a fund earmarked for Russian pensions to help it weather Western sanctions imposed over Moscow's role in Ukraine.Analysts expected the Russian government to turn down the proposal by the world's largest listed oil producer, one fifth owned by BP and run by a close ally of President Vladimir Putin, unless political pressure is brought to bear.It was one of the most stunning of several proposals for the Russian state to help firms hit by US and European sanctions over Moscow's annexation of Crimea in March and role in subsequent fighting in eastern Ukraine.A government source said Rosneft had asked the National Wealth Fund to buy 1.5 trillion roubles ($41.6 billion) of its bonds to cover its net debt.Deputy Prime Minister Arkady Dvorkovich told Russian news agencies it would take the government two weeks to come up with an answer. Rosneft declined to comment.Most of the $86 billion fund, built up from oil revenues to help finance a growing state pension deficit, has been invested in infrastructure projects to try to boost the economic growth that drove Putin's popularity during his first decade in power.Brokerage Otkritie said the state had little room for funding on such a scale. "Enthusiasm to support the country's largest tax payer via a reversal of the cash flow will be limited," it said in a note.Russia relies on energy for half its budget revenues and needs dozens of billions of dollars to sustain production from new tight oil reserves and Arctic deposits to finance Putin's soaring military and social costs.Analysts said Rosneft's long term prospects had been hurt by the sanctions but loans from China meant it was in reasonable shape for now.Russia, meanwhile, is on the brink of recession due to plummeting investment and near record capital flight, with an ageing population whose pensions are increasingly in doubt.Rosneft head Igor Sechin, also targeted individually by US sanctions, said the company needed the money to help it cope with a ban on US credits and loans with a maturity longer than 90 days, which European banks and investors have joined.


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Source: Oil & Gas News


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