Rosneft mulls the future of sanctioned subsidiary

Russia's state-controlled Rosneft is considering the future of its trading arm after it was placed under US sanctions in February for its role in Venezuelan oil marketing.

Rosneft Trading (RTSA) is winding down its Geneva-based activity, according to one European trader. Three other trading sources said some RTSA personnel have been transferred to Rosneft's German refining subsidiary, although Rosneft has not confirmed this.

"The future of RTSA as a trading business and its mandate is currently being considered, taking into account a potential change in the position of the US regulators given comprehensive actions undertaken by the company to date," Rosneft said in a statement today.

It reiterated that "all trading operations of RTSA that have any relation with Venezuela have been ceased in their entirety since March 2020" and that the company "fulfilled all requirements that were put forward by OFAC in relation to its operations in Venezuela" — a reference to the US Treasury's sanctions enforcement arm, the Office of Foreign Assets Control.

Rosneft emerged as the top buyer of Venezuelan crude in the months after the US imposed oil sanctions on Caracas in January last year. At least part of the Venezuelan supplies handled by Rosneft went towards paying down oil-backed debt owed by Venezuela's state-owned PdV. Rosneft reported that PdV had $800mn left to pay at the end of last year's third quarter. But it has since stopped disclosing updates regarding the debt repayments.

Another Rosneft commercial subsidiary involved in Venezuelan oil trading, TNK Trading, was also hit by US sanctions last month. Rosneft said on 28 March that it would sell 100pc of its Venezuelan oil assets to another entity wholly owned by the Russian state. The company said at the time that it expected US regulators to fulfill their promise to lift sanctions.

US special envoy for Venezuela Elliott Abrams said on 2 April that Washington will lift sanctions on RTSA if it has effectively withdrawn from Venezuelan business.

Any other business

RTSA has previously handled Iraqi Kirkuk blend crude that Rosneft received as part of pre-financing agreements with the Kurdistan Regional Government (KRG). It is unclear how Rosneft will market Kirkuk volumes in the future if RTSA is closed down. Mediterranean buyers say offers of Kirkuk blend from RTSA have been largely absent in recent trade. One trader said RTSA would struggle to find counterparties for the crude within Europe, where refiners are highly risk averse to exposure to US sanctions.

Rosneft also previously exported its Kazakh CPC Blend volumes through the trading arm. RTSA loaded 45,000 b/d of CPC Blend in the first two months of this year, but has been absent from the grade's loading programme since the April trading cycle.

The preliminary CPC Blend programme for May features a Shell subsidiary, Shell Trading International, which is set to load 46,000 b/d next month. Rosneft and Shell have a combined 7.5pc stake in the Caspian Pipeline Consortium (CPC) through a joint venture.

By Oksana Yablokova and Ruxandra Iordache