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.