Rosneft chairman added to US sanctions list

Vladimir Putin Speaks

BP's partnership with Rosneft is again under the spotlight after the chairman of the Russian state-owned oil firm was added to the US government's sanctions list.

Igor Sechin, credited with masterminding the tie-up with the UK-based oil and gas group from Moscow's side, will be banned from entering the US, and his assets will be frozen.

He has been an ally of Vladimir Putin's since they worked in the St Petersburg mayoral administration in the 1990s. Believed to have served as a Soviet spy, Sechin worked as Putin's deputy chief of staff and deputy prime minister, and is considered to be a leader of a conservative bloc within the Kremlin.

Rosneft itself was not on the sanctions list, which targeted seven individuals and 17 companies, mostly small banks. But its share price fell, and Standard & Poor's cut its credit rating to one notch above junk. S&P also downgraded Gazprom, and cut Russia's credit rating on Friday.

Timothy Ash, at Standard Bank, said the US government had gone for a "sanction-lite approach". It seemed clear, he said, that the US government "wants to ensure as little backdraft as possible to US/western interests, including institutional investors".

He said the sanctions on Sechin were "very significant from a political/business interest perspective … [but] Rosneft would only be impacted if it could be proved that he has majority ownership, which is unlikely to be the case."

The sanctions could make life awkward for Bob Dudley, BP's US-born chief executive, who as a member of the Rosneft board has regular face-to-face meetings with Sechin in Moscow. BP has been particularly sensitive to legal issues since the Gulf of Mexico oil spill, and "they won't want to do anything to upset the US", said Iain Reid, senior oil and gas analyst at the Bank of Montreal.

"It kind of raises the question for BP about why they continue to hold this [stake] but if they sold it then their share price would collapse. So they are stuck," Reid said.

BP shares fell 1% to 488p on Monday. A BP spokesman said: "We are committed to our investment in Rosneft, and we intend to remain a successful, long-term investor in Russia."

BP is not the only western company working with the Kremlin-backed company in pursuit of Russia's mineral riches. The US oil firm Exxon Mobil is helping Rosneft drill for oil in Siberia, and Norway's Statoil is working with Rosneft in the Arctic.

Sechin, who brokered these deals, is widely regarded to be the head of the Kremlin's siloviki, a group of nationalist hardliners with a security or military background. He has controlled Russian energy policy for a decade and has been linked to the Russian government's seizure of the oil giant Yukos in 2003 and the jailing of its billionaire owner Mikhail Khodorkovsky. He is credited with transforming Rosneft from an outdated company into a more globally competitive force.

BP is set to face further questions when it announces its results on Tuesday, having been forced on the defensive at a shareholder meeting in London this month. Dudley told investors it was "business as usual", while BP's chairman, Carl-Henric Svanberg, said BP's stake was not at risk.

Powered by Guardian.co.ukThis article was written by Jennifer Rankin, and Alec Luhn in Moscow, for The Guardian on Monday 28th April 2014 18.37 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

JefferiesAnd the Best Place to Work in the global financial markets 2016 is...

Register for Financial Markets News Alerts