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US Russia Sanctions Put Syndication Funding for Rosneft Purchase On Hold

  • August 26, 2017
  • By Pete Nisbet
  • 0

US Russia sanctions have delayed the syndication of an Intesa Sanpaolo loan. The loan was provided by the Italian bank to Glencore and Qatar’s wealth fund. The latter needed the finance to buy a stake in Rosneft, the Russian state-owned oil company.

 

The €5.2 billion loan ($6.2 billion US) was provided to Switzerland-based Glencore and the Qatar Investment Authority for their purchase of a 19.5% stake in the Russian oil company, majority owned by the Kremlin. The Italian bank had intended to syndicate this loan: it had invited 15 other banks to participate.

US Russia Sanctions

New US Russia Sanctions in July

However, Rosneft, along with is CE Igor Sechin, had been sanctioned by the US three years ago in response to the annexation of Crimea. Because of this, some banks refused to participate while others had agreed. To compound matters, the US applied new sanctions on Russia in July. These were applied in response to perceived meddling by the Russian government in the US presidential election.

 

A consequence of this latest sanction is that western banks have decided to put any participation on hold. They may or may not participate in the syndication once the full implications of the new sanctions are understood. Intesa is Italy’s largest retail bank, may be in a difficult position should the proposed loan syndication fail to proceed. It would mean that the full risk of the loan lies with Intesa Sanpaolo.

Saudi – Qatar Issue Involved

However, US Russia sanctions are not the only issue involved here. Saudi Arabia, along with several other Gulf states, has political issues with Qatar. These originate in the Saudi’s belief that Qatar is too friendly with Iran and also with the Muslim Brotherhood. Saudi Arabia, United Arab Emirates, Bahrain and Egypt, cut ties with Qatar on June 5. Saudi Arabia has severed all land, sea and air links with Qatar.

 

A result of this is that other countries are reluctant to upset relations with Saudi Arabia and UAE by becoming involved in a loan to Qatar Investment Authority, Qatar’s state-owned holding company. Between the two issues, Qatar and the US Russia sanctions, the syndication seems tenuous at best. Additionally, even the Bank of China, which had originally agreed to participate in the syndicate, is now reluctant to proceed.

Not Only US Russia Sanctions

So, it is not only US Russia Sanctions that have put the funding syndication for the Rosneft purchase on hold. There is more to it than just that. Intesa is a fairly small fish in the investment banking pool, and would certainly not be happy going it alone. It’s very much a matter of ‘wait and see’. The Italian government says the loan is compliant with the new sanctions. We shall wait and see!

About Pete Nisbet

Pete has been working in the field of website design and content for many years. He has a great interest in technology and current affairs, particularly business affairs. Pete's interests are technology, writing and world affairs and he is widely traveled. Pete also holds an Honors BSc from the University of Edinburgh.