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The government is facing a huge dilemma – to cough up almost $50 billion requested by the Russian oil giant Rosneft for its investment plans or not.
To agree to the plunder would bring a host of negative outcomes:
· draining the National Wealth Fund,
· denying funding for dozens of smaller projects,
· bolstering the political weight of Igor Sechin, a hawk and close ally of the Kremlin.
Moody’s recently comments on the news by saying a positive decision would further destabilize the national economy.
A rejection would curb Rosneft’s appetite but significantly limit its resources to fund new projects that would drive revenue into the Russian budget.
Russia-IC looks at the media response.
Turkey’s World Bulletin polls experts who predict major ‘budgetary and revenue problems’ in case the Russian government does not help Rosneft, which the news source calls “a significant driver of the country's economy”
"Energy companies haven’t got much choice, but to ask the government for help," Worldbulletin quotes Liza Ermolenko, an energy markets economist at Capital Economics, a London-based independent research company.
"The problem is Russian energy companies cannot access external financial markets and they cannot borrow heavily," she said, adding that Rosneft probably has the highest external debt of all companies in Russia.
The Wall Street Journal also points out that Rosneft is the backbone of Russia’s economy and that it is heavily indebted to the tune of $55 billion.
Forbes Magazine looks deeper into the performance of Rosneft’s shares.
“Rosneft shares have been resilient in the aftermath, outperforming the Market Vectors Russia (RSX) exchange traded fund by wide margins. Rosneft is down 9.58% while the Market Vectors Russia ETF is down 20.05%,” says its report.
It also reminds investors that In March 2014, “Rosneft drew down 12.5 billion rubles in funds under a long-term fixed rate loan agreement with a Russian bank. The loan is due in the first quarter of 2017. In February-March 2014, Rosneft partially repaid two long-term unsecured loans totaling $5.52 billion from a group of international banks to finance the acquisition of TNK-BP, including $760 million in upfront payments.”
Rosneft has become the world's leading publicly traded oil producer after it took over BP's Russian venture TNK-BP for $55 billion in March 2013. Rosneft has a vast and high-quality reserve base, with total proved hydrocarbon reserves of 22.8 bln barrels of oil equivalent – among the best indicators for a global publicly traded oil and gas company. Moreover, Rosneft is second-to-none on an international scale in terms of total proved liquid hydrocarbon reserves. The company’s proved reserve-to-production ratio is 25 years.
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Author: Mikhail Vesely
