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China deepens ties with Russia, invests $9.1 billion in Rosneft

Glencore and QIA will retain stakes of 0.5 percent and 4.7 percent in Rosneft respectively


A logo of Russian state oil firm Rosneft is seen at its office in Moscow
A logo of Russian state oil firm Rosneft is seen at its office in Moscow

Chinese conglomerate will buy a 14.16 percent stake in major for $9.1 billion from a consortium of and the Qatar Investment Authority, strengthening the energy partnership between Moscow and

Energy has grown in recent years from a niche trader into a sprawling energy conglomerate and the transaction will allow China, the world's second largest energy consumer, to boost cooperation with the world's top producer.

The deal comes as the United States imposes a new round of economic sanctions on Russia, making it difficult for large Western firms such as to develop partnerships and increase ties with state-owned firms such as

said in a statement that will buy shares at a premium of around 16 percent to the 30-day volume weighted average price of shares without naming the price. A spokesman said the company would pay $9.1 billion.

Rosneft's market capitalisation stands at $57 billion and the deal makes it one of the largest investments ever made by into Russia.

and QIA will retain stakes of 0.5 percent and 4.7 percent in respectively.

The Kremlin has been seeking to expand its ties with China, especially since the West imposed wide-ranging sanctions on Moscow to punish it for the annexation of Crimea and an incursion into east Ukraine in 2014.

Russia tops the list of Chinese crude suppliers where it competes with its arch-rival Saudi Arabia, the world's largest exporter.


and QIA agreed to buy a 19.5 percent stake in in December 2016 for over 10.2 billion euros to help the Kremlin plug budget holes.

The transaction coincided with expectations of political detente between Moscow and Washington after Donald Trump became U.S. president and pledged to improve ties with Moscow.

is run by Igor Sechin, a close ally or President Vladimir Putin, who awarded special state decorations to the head of Ivan Glasenberg for executing the transaction.

Putin also awarded state decorations to the head of Italian bank Intesa SanPaolo, Antonio Fallico, for helping fund the deal with a 5.2 billion euro loan.

The transactions has, however, raised a lot of questions among bankers and market analysts.

and QIA never disclosed the final beneficiaries of the stake and Intesa could not syndicate the loan from other banks to share risks as most lenders declined to get involved because of new sanctions on Russia.

Intesa said its 5.2 billion euro loan will be reimbursed following the deal.

"It always looked as if the Qatar-deal was hastily arranged so as to allow the privatisation to take place by the end of last year and the proceeds booked to the federal budget," said Chris Weafer from Macro Advisory consultancy.

Last month, Washington imposed further sanctions on Moscow in the strongest action against Russia since 2014 - in part as a response to conclusions by U.S. intelligence agencies that Russia meddled in the presidential election.

On Friday, Sechin said QIA and cut the stakes partially because of a decline in the U.S. dollar against the euro, which made debt servicing more expensive.

Sechin told reporters would get access to Rosneft's fields and petrochemical projects in East Siberia to guarantee bigger synergies.

"From Rosneft's point of view, the arrival of such a partner is positive as it shows that the foreign investors still keep their interest to the industry," said Alexander Kornilov from Aton brokerage in Moscow.

said the deal would give it annual equity production of 42 million tonnes (840,000 barrels per day) and access to and gas reserves of 2.67 billion tonnes (20 billion barrels).

The deal will be China's second largest and gas acquisition after the $15.1 billion purchase of Canada's Nexen by CNOOC in 2013. Earlier this decade, also loaned $25 billion to Russia to help it build a pipeline from Siberia.

First Published: Sat, September 09 2017. 14:36 IST