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The deal to sell a stake in Russia’s oil giant Rosneft to a Chinese investor ranks among the Russian media’s top stories for Monday. China’s CEFC will acquire a 14.16% stake in Rosneft for over $9 bln, which makes it the biggest Chinese investment in Russian business ever, RBC writes. A source close to the dealmakers told the publication that the euro-denominated transaction amounts to around 7.5 bln euros.
Craig Pirrong, a professor of finance at the University of Houston, believes the deal’s price tag is excessive as the announced 16% premium to the market price is unusual for a sale of a minority share, particularly in case of Russia given the local investment climate. The expert says CEFC should have received something in return, for example, preferential terms of Russian oil supplies. Indeed, Rosneft also signed a long-term oil supply contract with CEFC, but the volume of forthcoming deliveries has not been disclosed. GL Asset Management’s Sergey Vakhrameyev agrees that the premium should have something behind it, for example, control. Without the premium and paid dividends, the loss of QIA and Glencore that previously owned the asset, would have been around 900 mln euro as the cost of Rosneft has dropped by a quarter since the December transaction, he told Vedomosti.
The privatization of 19.5% of Rosneft began in autumn 2016 as a strictly secret procedure. On December 7, 2016 the deal was completed when the company’s CEO Igor Sechin met with President Putin in the Kremlin and the consortium of the oil trader Glencore and the Qatar sovereign fund was to be the buyer of the stake. That was contrary to the expectations of analysts, who up until the last moment, forecasted the purchase of Rosneft by Rosneft itself. None of the analysts' forecasts on the transaction came true: the stake in the company was bought by foreign investors, the money was transferred to the budget on time and in full - 710.8 billion rubles ($12.4 bln). Rosneft’s stake was sold for 10.2 billion euros (692 billion rubles), although initially the government set the threshold for the sale of shares at 710.8 billion rubles.
In early September, Rosneft signed a cooperation agreement with CEFC on exploration and oil production in East and West Siberia, as well as a contract on Russian oil supplies. The company’s official representative Mikhail Leontyev told RBC that Rosneft is discussing cooperation in the area of oil production and raising funds with CEFC. He added that the issue is mostly about greenfield projects, such as the Suzunskoye field. "They have the opportunity of raising funds on reasonable and comfortable terms," he said.
The Eurasian Economic Commission (EEC) has reported an increase in Russia’s food supplies to EAEU member-states, Izvestia writes. Fish exports to Armenia, Belarus, Kazakhstan and Kyrgyzstan amounted to $34.8 mln in 1H 2017, a 16.4% rise year-on-year. The deliveries of vegetables totaled $7.6 mln in the same period, a 51.8% increase compared with January-June 2016. Russian meat exports to EAEU markets amounted to $40.7 mln, a 29.4% rise, the publication said.
A source in the Agriculture Ministry told Izvestia that the increase in food supplies to the EAEU is aimed at saturating the total market of the Eurasian Economic Union, while Russia is widening its exports, primarily of fish, vegetables and meat, due to an abundance of those products on the local market. According to Dmitry Vostrikov, Executive Director of the Rusprodsoyuz Association, local manufacturers produced 1.3 mln tonnes of cattle meat in January-July of 2017, a 7% increase year-on-year, and 2.7 mln tonnes of poultry, a 4.3% rise year-on-year. "In five months of 2017, fish production went up 7.4% to 2.2 mln tonnes. We saw a rise in annual growth of greenhouse-raised vegetables of up to 30%. The implementation of import substitution projects in the agriculture sector have been demonstrating positive dynamics, which influenced the volumes of export supplies," he added.
President of the National Trade Association Vadim Zuykov told Izvestia that Russian food products are in high demand on the EAEU market. "That is why it is necessary for Russia to supply products there. The demand for locally-made meat, fish and vegetables is high in the Eurasian Economic Union," he said. President of the Russian National Vegetable Producers Association Sergey Korolev added that the price of Russian vegetables is also an attractive element for EAEU states. "The price of vegetables products from Russia is relatively low for Eurasian Economic Union states," he said, adding that "supplies of potatoes, cabbages, onions, beets and carrots, as well as beans, have surged for the past year."
Russian military policemen will be sent to the fourth and last Syrian de-escalation zone in the Idlib province to monitor the ceasefire and humanitarian aid deliveries, a high-ranking source in Russian diplomatic circles told Izvestia. "Currently, specific parameters of this zone’s operation are under discussion. It will be controlled by the Russian military police," he said. Another source in Russian military circles confirmed the information to Izvestia.
At the moment, there are already three de-escalation zones in Syria, with Russian military policemen present in all of them. Russia, Iran and Turkey are negotiating the creation of the fourth zone in the Idlib province. Initially, a proposal was put forward that Turkey would assume responsibility for implementing the ceasefire in the region. Experts say Russia’s efforts to beef up its influence in this part of Syria would remove the possibility of Ankara taking over Idlib, which lies on the border with Turkey.
Oleg Glazunov, an expert at the Association of Military Political Scientists, told Izvestia that the move is also likely to prevent Syria from splintering apart. “Most likely this is due to talks with Turkey. The Turkish president understands that he will not be able to control the situation in Idlib, and huge losses are possible among the military. Also, if Ankara has designs on carving out a piece of Syria, it won’t do it in the current atmosphere,” he said.
Turkey’s tomato imports to Russia that have been banned since 2016, may return to the Russian market in October, Kommersant business daily writes. Russia’s Agriculture Ministry and the nation’s veterinary and phytosanitary watchdog are mulling over a partially resumption of tomato imports from Turkey to the Russian market, a manager from a major vegetable producer and several representatives of the sector’s association told the newspaper. Supplies are expected in October as several producers authorized by the national watchdog will be allowed to supply tomatoes until April-May 2018 as a pilot project.
However, a source told Kommersant that there is no unanimous opinion inside the Russian government as to when and how to lift the current embargo on Turkish tomato imports. Another source told the newspaper that tomato supply contracts are being negotiated, particularly, with Magnit, Russia’s second-biggest food retailer.
Moscow banned imports of vegetables and fruits from Turkey due to phytosanitary considerations on January 1, 2016 shortly after Turkey’s air force shot down a Russian Su-24 bomber in Syria airspace in November 2015. Since then Russia has lifted almost all restrictions on deliveries of agricultural products from Turkey to date, nonetheless, tomato imports are still banned. Market players expect Turkey will deliver 100,000-300,000 tonnes of tomatoes to Russia until next summer, Kommersant says. According to Director of the analytical center Sovecon Andrei Sizov, "Turkish suppliers are likely to be more satisfied with this mechanism than with the one discussed earlier that entails deliveries in summer and autumn, in which case Turkish tomatoes would face lower demand on the Russian market." However, he warns that despite the upbeat decision on tomato imports, Turkey may still remain a rather somewhat unpredictable partner that may re-impose restrictions on Russian agricultural supplies.
As one of the world’s biggest wheat importers, Egypt has outlined a new grain quality requirement and will now accept grain with protein contents of no less than 12.5%, Nezavisimaya Gazeta reports. Until recently, the country accepted Ukrainian, Russian and Romanian grain with 12% of protein and even 11.5% from France and the United States. The new regulation benefits Russia, but may squeeze Ukraine out of the Egyptian market, according to Ukraine’s Acting Minister of Agrarian Policy and Food, Maksim Martynyuk, who believes there is collusion between Russia and Egypt against Ukrainian producers. "The requirements for goods are being changed in order to boost the supplies of Russian grain. And if the customer has set its sights on buying Russian grain there is hardly anything we can do about it,” he said.
"The new regulation is not very good news not only for Ukraine, but also for France, which exports grain of lower quality. And the changes are really beneficial for Russia, since its grain supplies meet the requirement for protein," Director of the analytical center Sovecon Andrei Sizov told Nezavisimaya. "Egypt has long been raising the level of its requirements on protein content in wheat, this being its strategic campaign. I think that this is related to the fact that the country is getting ready to cut the state program on subsidized bread production. In order to mitigate the negative effect of this move, a new mechanism may be offered to the market - less bread, but of higher quality," he added.
In 2016, Moscow exported 27.8 mln tonnes of wheat. The US Agriculture Ministry expects Russia to outstrip the United States in wheat export this year and become the world’s top wheat exporter, breaking the record of 31.5 mln tonnes, the publication says.
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