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Exclusive: Rosneft in stand-off with oil buyers as it seeks sanctions protection

Reuters  |  MOSCOW 

By Olga Yagova

MOSCOW (Reuters) - wants its Western buyers to accept new terms and pay penalties from 2019 if they fail to pay for supplies in the event that new U.S. sanctions on the Russian disrupt its sales, according to trading sources and Rosneft's draft contracts.

The buyers - including some of the world's biggest companies and traders such as BP, Royal Dutch Shell, Total, and - are fiercely opposing the move, according to trading sources.

The stand-off is likely to force to soften its demands, the sources said, adding that the development shows the extent to which the is concerned about widening U.S. sanctions on

"It is all very uncertain with the sanctions and is clearly worried and is trying to minimize possible risks," said a trading source with a European "We said no, we couldn't accept this," he added.

Rosneft did not immediately respond to a request comment. and declined requests for comment. Shell, Total, did not respond to inquiries.

has been under U.S. and EU sanctions since 2014 when it invaded Ukraine's Crimean peninsula. The sanctions have been repeatedly widened to include new companies and sectors, making it tough for Russian to borrow money abroad, raise new capital or develop Arctic and unconventional deposits.

has been hoping for a thaw in relations with the since came to power but has imposed new sanctions instead, including on some of Russia's richest people.

Russian businesses are preparing for a new wave of sanctions expected in the coming days and months. The firms are trying to diversify away from dollar payments and tapping for more of their financing and

Rosneft is run by a close ally of Putin,

He and his company have been under sectoral sanctions since 2014. Rosneft has so far avoided being put on the Special Designated Nationals (SDN) list, which would make it impossible for Western companies to have dealings with it.

When put Russia's on the SDN list earlier this year, the move brought its metals exports to a near standstill and disrupted its access to raw materials from suppliers around the world.


A Rosneft tender document seen by Reuters showed the company had asked its to accept a new clause in its 2019 annual tender to sell

"No sanctions ... shall terminate or amend any obligations of the parties stated by the contract," the document said.

It also said that if a buyer walks away from the contract because of sanctions, it must compensate Rosneft with a payment that could either be a fixed amount or a sum calculated on the basis of the contract terms.

Currently Rosneft has relatively mild sanction clauses, which say that none of the parties has an obligation to abide by the contract if sanctions are imposed and no penalty is levied.

Rosneft is the world's largest listed oil firm with at around 5 million barrels per day. It produces over 4 percent of global oil - on par with - and counts all the global among its buyers.

The buyers have insisted on sticking with the old clauses, according to five trading sources.

Rosneft has so far said that it could not guarantee to consider buyers' bids at tenders as valid unless they accept the new terms.

Rosneft will award its supply tenders on Dec. 5, according to the tender documents, giving the companies more time to negotiate.

(Writing by Dmitry Zhdannikov; Editing by Giles Elgood)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, November 06 2018. 19:31 IST