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Russian oil giant CEO defends company’s request for financial aid amid sanctions

October 29, 2014, 20:28 UTC+3 TOMSK
Rosneft’s contribution to the budget revenues is the largest in Russia
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Rosneft CEO Igor Sechin

Rosneft CEO Igor Sechin

© EPA/ JEON HEON-KYUN

TOMSK, October 29. /TASS/. Russia’s state-owned oil company Rosneft does not find it shameful to ask the country’s National Welfare Fund for financial assistance, Rosneft CEO Igor Sechin said Wednesday.

“Rosneft’s contribution to the budget revenues is the country’s largest. So we don’t find it shameful to turn [to the Fund] with such a request, all the more so as the talk is about a loan on market conditions,” Sechin told journalists.

“If we have such opportunities, then the investment program will be bigger and the multiplier effect will also be greater. It’s normal work. If we don’t get [the assistance], we will cope [with the situation] on our own. Some things will be adjusted, but there’s no drama on the whole,” he said.

Rosneft wants $48 billion

Rosneft earlier filed a request for over $48 billion from the National Welfare Fund amid the persisting Western sanctions against Russian banks and energy companies for Russia’s position on events in Ukraine.

Sechin said media interest in the topic is “obviously exaggerated.”

“For some reason, no one is worried that Russian Railways [rail monopoly] and Novatek [Russia's largest independent natural gas producer] are conducting such work too. Almost all large banks and private projects ask the government to facilitate access to additional opportunities of project financing,” he said.

“It would be wrong if we did not conduct such work in the interests of our shareholders,” Sechin said.

The company will draw attention to the Russian government’s resolution that describes in detail for which purposes the National Welfare Fund’s money can be used, he said.

“All our requests are fully in line with all goals described in the government resolution. These are project financing and bonded loans, up to purchase of shares. We believe our request has been formulated in line with requirements set in the government resolution,” Sechin concluded.

Russian economy minister speaks on Rosneft request

Russian Economic Development Minister Alexey Ulyukayev said Wednesday Rosneft’s request for financial assistance from the National Welfare Fund does not correspond to reality and the requirements for projects qualifying for financing from the Fund.

“We will work with the company. The request in its current form does not comply with the requirements, which are set for projects qualifying for financing from the National Welfare Fund because it actually aims to cover the company’s financial gaps as a whole and in regard to its investment program,” Ulyukayev said.

He said Russia’s regulatory framework does not stipulate that type of financing.

“That is why we will work with the company to ensure that it follows the requirements [of the regulatory framework] and determines the investment project that it believes can qualify for financing from the National Welfare Fund,” Ulyukayev said.

“Correspondingly, work will be carried out on all the stages stipulated by the resolution [on financing from the National Welfare Fund],” he said, without specifying the amount that could be allocated to Rosneft from the Fund or the term for which the company was requesting assistance.

Infographics Economical sanctions against Russia Economical sanctions against Russia
The USA, EU, Canada and Australia have introduced sanctions against Russia over its involvement in the Ukrainian crisis. Infographics by ITAR-TASS
Possible positive effect for Russia’s economy

Russian Finance Minister Anton Siluanov earlier said Rosneft expected to receive over 2 trillion rubles for the development of its projects. The Rosneft CEO has said financial assistance from the National Welfare Fund will have a positive effect on Russia’s sovereign rating and “yield a multiplier effect for the country’s entire economy.”

As of October 1, 2014, Russia’s National Welfare Fund set up to accrue surplus revenues from oil exports totaled 3.277 trillion rubles, which was equivalent to $83.2 billion, according to the Finance Ministry’s data.

Therefore, Sechin’s request for financial assistance would have equaled more than half of the Fund’s financial resources, if it had been met.

Use of Fund’s money for investment projects

The procedure for the Fund’s management allows using up to 60% of its resources for investment in shares and bonds of Russian companies implementing large-scale investment projects.

In late 2013, the Russian government approved the allocation of 150 billion rubles ($3.7 billion) for each of three major infrastructural projects: the construction of the Central Ring Road around Moscow and the upgrade of the Baikal-Amur Mainline (BAM) and the TransSib rail link.

In mid-2014, the Russian government approved the allocation of 114 billion rubles ($2.8 billion) for the projects to develop the infrastructure of the Rosseti power grid company, telecoms provider Rostelecom and building the Kyzyl-Kuragino railroad to link the Republic of Tyva in southern Siberia with the Krasnoyarsk Territory in East Siberia and the country’s rail network.

Sanctions against Russia

Russian officials and companies came under the first batch of Western sanctions, including visa bans and asset freezes, after Russia incorporated Crimea in mid-March after a coup in Ukraine in February.

The West announced new sectoral penalties against Russia in late July over Moscow’s position on Ukrainian events, in particular, what the West claimed was Russia’s alleged involvement in hostilities in Ukraine’s embattled southeast.

In response, Russia imposed on August 6 a one-year ban on imports of beef, pork, poultry, fish, cheeses, fruit, vegetables and dairy products from Australia, Canada, the European Union, the United States and Norway.

Moscow has repeatedly dismissed Western allegations that it could in any way be involved in hostilities in the southeast of Ukraine.

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