Russneft ruling coming soon; frustrated Deripaska: “big company, big problems”

In a recent interview, Deripaska classified the situation he’s facing in securing the rights to go ahead and take control of Russneft — Mikhail Gutseriev’s former oil company — as “big company, big problems.” The Federal Anti-Monopoly Service, in a case muddled by tax problems and inter-governmental clashes, is expected to rule on his application to purchase most of Russneft’s assets by November 30th. As was reported earlier, Basic Element is joined by Swiss commodities trader Glencore in seeking Russneft’s assets. It now appears that the two firms are seeking to split the oil company 75%-25% respectively.

Deripaska also laid out his plans for Russneft, specifically how he hopes to concentrate on “the development of oil refining and petrochemical plants,” since the current oil situation in Russia is much more suited to profits from sales of refined products, rather than from crude (as explained by a recent Wall St. Journal article). This environment, combined with the fact that many of Russneft’s oil fields are apparently in decline, makes investing in refining capabilities the logical choice. Estimates for the cost of upgrading Russneft’s refineries stand at around $1 billion, however.

Oleg Deripaska’s attempt to buy Russneft is just one example of how the Russian billionaire is spreading his interests. His airplane unit is linked with Bombardier over a potential deal; his previous expansion into Canada’s auto-parts maker Magna has led to (denied) rumors that he’s interested in Land Rover, Jaguar, or other American auto players; he recently bought a quarter stake in the Austrian construction firm Strabag, with plans to cooperate on Russian infrastructure projects; and he is looking to partner with a Canadian mining company to enter into the gold industry, echoing the planned diversification outside of the aluminum industry for his mining behemoth RusAl. Despite these moves, Deripaska still pledges to stay focused on Russia.

2 responses to “Russneft ruling coming soon; frustrated Deripaska: “big company, big problems”

  1. What is the prospect that the Federal Anti-Monopoly Service would not approve the proposed purchase? Do you know if the Service routinely OKs all applications, is susceptible to pressures or incentives, or carries out a careful analysis of each application using previously established and reasonable standards?

    Thanks for helping to keep the rest of us informed.

  2. The FAS is most often a rubber-stamp. Usually, major deals will have already been cleared through the necessary back channels before they even get to the anti-monopoly service, assuring their approval. That was the expectation when the prospective sale was first announced months ago. When there is this kind of delay, that means someone in the government is making a stink about it — that something unexpected is going on behind the scenes.

    The service seems to have gained more teeth in the past few years, but I don’t think it’s gotten to the level of a trusted high-level independent monitor by any means. The sense is that it can still be co-opted by certain forces for unrelated matters.

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