US imposes sanctions on Rosneft Trading: Resend

Resends story published on 18 February to add missing word in paragraph 6

The US administration today imposed sanctions on the oil trading arm of Russia's state-controlled Rosneft over its involvement in Venezuelan oil trade.

The US Treasury Department placed Rosneft Trading and its president, Didier Casimiro, on its sanctions list. The action affects both US and foreign companies, which will have 90 days — until 20 May — to wind down their business dealings with Rosneft Trading. The Treasury's guidance advised foreign companies not to enter into new contracts with Rosneft Trading and to seek waivers if they are unable to fully wind down existing business by 20 May.

Treasury's sanctions enforcement arm, the Office of Foreign Assets Control (OFAC), clarified that parent company Rosneft and its Rosneft Oil subsidiary will not be affected.

But placing Casimiro on the sanctions list will likely affect the parent company indirectly, as he serves as Rosneft vice president for refining, petrochemical, commerce and logistics. OFAC in the past imposed penalties on companies signing contracts with individuals on the US sanctions list, even if the parent company in which they served was not itself targeted.

The administration downplayed potential effects on oil prices from today's action. "Global oil markets are adequately supplied, and so we think, while this is a serious action, global markets will remain stable," a senior administration official said.

Rosneft Trading supplies EPSO Blend, Urals, CPC Blend and Sokol crudes under long-term contracts to trading firm Trafigura, and buys Urals under an annual contract with Belarus' state-owned Belorusneft.

Rosneft Trading is one of five firms that market Kirkuk crude on behalf of Iraq's semi-autonomous Kurdistan Regional Government, and has been active in trading sweet Libyan grades, although this activity has tailed off recently. It regularly loads CPC Blend and Azeri grades in the Black Sea and delivers them to the German port of Wilhelmshaven. The Rosneft parent company has stakes in three refineries in Germany: Schwedt, Neustadt-Vohburg and Karlsruhe.

The US has given only a day's advance notice to Germany and other allies in Europe potentially affected by sanctions against Rosneft Trading. But the 90-day period should be sufficient "to disentangle arrangements with that entity" and the US is in a position to "calibrate the actions while maintaining the strength of our sanctions," another senior official said.

Rosneft Trading has been targeted because it is handling about 70pc of Venezuelan oil sales, State Department special Venezuela envoy Elliott Abrams said. Rosneft Trading facilitated a 2mn bl shipment of 16°API Merey crude from Venezuela to west Africa last month, and 55mn bl in other shipments in September-December 2019, according to Treasury.

Rosneft Trading's parent company has been loading crude cargoes from Venezuela in repayment of previous debt extended to Caracas by Moscow. Rosneft supplies India's Reliance Industries and Indian firm Nayara's refining system, which it partly owns.

Similarly, Spain's Repsol take oil in lieu of cash payment for its operations in Venezuela. Chevron is lifting Hamaca synthetic crude from its PetroPiar joint venture with PdV, using some of the funds to pay for maintenance of its operations. Abrams would not say if Chevron's latest sanctions waiver to operate in Venezuela will be extended once it expires on 22 April.

The previous US guidance did not explicitly prohibit oil-for-debt trade, but Washington has concluded that such deals enable Venezuelan president Nicolas Maduro to remain in power, US officials said.

Rosneft denounced the sanctions as "baseless and illegal" and said it was lifting cargoes from Venezuela under contracts predating the US sanctions regime. "Rosneft is not violating the illegal restrictions imposed by the US — something that the US agencies acknowledged in the past," it said.

The sanctions against Rosneft Trading are arbitrary because US and other international companies continue to operate in Venezuela, it said.

By Haik Gugarats