Russian Government Reportedly Approves Bashneft Sale: Bloomberg

October 6, 2016
Bashneft. Photo by Andrey Rudakov/Bloomberg

LIVE UPDATES: The Russian government has reportedly approved the purchase of the oil company Bashneft by Rosneft, Russia’s leading state oil producer headed by Igor Sechin, Bloomberg reported.

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Russian Government Reportedly Approves Bashneft Sale: Bloomberg

The Russian government has reportedly approved the purchase of the oil company Bashneft by Rosneft, Russia’s leading state oil producer headed by Igor Sechin, Bloomberg reported.

As we reported, earlier this week the board of Rosneft, which includes two government officials — presidential aide Andrei Belousov and Aleksandr Novak, energy minister — approved the purchase.
Pavel Fyodorov, first vice president of Rosneft, told TASS that the board of directors had made “all the decisions that the board of directors were supposed to make” and now “it’s up to the government.”

In September 2014, law-enforcers arrested Yevtushenkov, the CEO of Sistema, the company that owned majority shares of Bashneft, then seized Bashneft, claiming there were unlawful aspects of the original deal back in 2009.

At the time, bloggers immediately predicted that Rosneft would grab Bashneft and posted satirical comments on social media: 

Translation: On Igor Sechin: The “Khodorkovsky” suit; make-up by Bashneft; interior design by Sistema.
In this picture we see a famous scene from the American TV series “Breaking Bad,” showing Huell Babineaux, the bodyguard of Saul Goodman, who was the crooked lawyer of chemistry-teacher-turned-meth-dealer Walter White. Huell is lying on the hidden stash of Walter’s drug business to guard it.
Eventually Yevtushenkov was released and the case against him dropped, but by that time prosecutors had seized Bashneft. He decided not to seek compensation.
Now, the government is re-privatizing Bashneft on its terms, and Rosneft is to pay no more than 329.6 million rubles ($5.3 billion) for the company, two sources told Bloomberg. Bashneft was originally owned by the government of Bashkortostan (Bashkiria) in Russia’s southeast.
Bloomberg reports:

Rosneft will get the Bashneft stake without a tender, the third person said. Interfax reported that Rosneft Chief Executive Officer Igor Sechin should sign documents on the deal by Oct. 15. The oil company’s press service declined to comment, as did government spokeswoman Natalya Timakova.

Originally valued at as much as 315 billion rubles, the Bashneft sale will be the nation’s largest privatization since Rosneft’s $10.7 billion initial public offering in 2006. A fight over potential buyers delayed the Bashneft sale earlier this year as some members of the government had sought to keep assets from shifting from one state pocket to another. Even President Vladimir Putin has acknowledged that acquisitions by other state companies is probably “not the best option.” Still he left the door open for Rosneft, saying it wasn’t strictly a government-owned company because BP Plc owns almost 20 percent of its shares.

In a related scandal, Sechin is suing the news site RBC for “damage to business reputation” for publishing an article based on government officials who said the Kremlin had ordered that prospective investors in Rosneft, which is to privatize 19.5% of its shares, should not collude with British Petroleum (BP) which already owns 19.5% of Rosneft’s shares, and thus gain the ability to block the company.

Sechin is demanding $5.3 billion in damages, a sum that is roughly double RBC’s yearly revenue, and would break the company, already under pressure from the government with the dismissal of its top 3 journalists and their replacement by TASS editors.

— Catherine A. Fitzpatrick