The Russian government has been seeking buyers for a 19.5% stake in the state-owned oil firm Rosneft OJSC. While this is itself not really unexpected, two prominent sources recently indicated (for the first time) that Russia would prefer a joint deal with China and India.
That said, Kremlin spokesman Dmitry Peskov was recently quoted as saying that there was “no single preferred option” for the sale — which is estimated to raise at least 700 billion rubles (~$11 billion).
While the economic benefits of such a deal with China and India are obvious, the geopolitical benefits are possibly substantial as well — helping to strengthen the ties between the 3 top powers in Asia. Interestingly, such a deal would change the internal dynamics of Rosneft somewhat — balancing against the 20% stake held by London-based BP Plc (acquired mostly in 2013).
“This would be a logical choice,” commented Vladimir Tikhomirov, chief economist at BCS Financial Group, a Moscow brokerage. “India and China aim to boost ties with Russia, while Russia’s options for investors in Rosneft are quite narrow.”
India and China have both publicly expressed individual interest in Rosneft, but it’s not yet clear what the positions of the two governments is on a joint deal.
The Indian Oil Minister Dharmendra Pradhan did comment, though, that one couldn’t be ruled out.
“We are not rivals,” Pradhan stated during a recent interview at Putin’s annual economic forum in St Petersburg. He also noted that India’s Oil & Natural Gas Corporation and China National Petroleum Corporation had already partnered together a number of times previously.
Bloomberg provides some interesting background on the situation, noting that “China has provided Rosneft and other Russian energy companies with more than $100 billion in loans and prepayments for supplies over the past decade, money that helped fund the acquisitions that turned the state-run company into the world’s largest publicly traded oil producer by output three years ago.”
Going on: “While Russia’s oil trade with India, by contrast, has been minimal, that’s starting to change now that the country is replacing China as the center of global growth. The International Energy Agency predicts India, the fastest-growing major economy, will consume 4.2 million barrels a day this year, surpassing Japan’s 4.1 million, and use an additional 6 million a day by 2040, compared with 4.8 million barrels a day more for China.”
A couple of further points to make here:
- India’s largest oil company, ONGC, paid Rosneft $1.27 billion for a 15% stake of the Vankor oil field recently.
- A further 23.9% share of the project was sold by Rosneft recently to 3 other Indian companies — Oil India Ltd, Indian Oil Corporation, and Bharat PetroResources. The deal was reportedly valued at around $2.02 billion.
- Rosneft Chairman and Putin aide Andrey Belousov was recently quoted as saying that Russia preferred a sale to 2 strategic partners.
- The Energy Minister Alexander Novak was quoted as saying that interest from both China and India was welcomed.
- Russia’s Economy Minister Alexei Ulyukayev stated recently that he expected a deal to be made sometime this year.