Russian Oil Giant Hoards $44 Billion Cash in Sanctions’ Shadow

Russian Oil Giant Hoards $44 Billion Cash in Sanctions’ Darkness

  • Surgutneftegas may be stuck with cash if decreases are imposed
  • Rising concerns U. S i9000. may hit company after sanctioning CEO

Surgutneftegas OJSC , Russia’ s fourth-largest oil producer, is consolidating the position as the country’ s wealthiest company by amassing $44 billion dollars in cash and bank deposit even as risks of further Oughout. S. sanctions mount.

The Siberian driller increased its cash stack 6 percent in dollar conditions last year, according to a statement Sunday. Surgutneftegas didn’ t include a break down by currency in its 2017 are accountable to international standards. For at least earlier times six years, it has held the majority of the cash the U. S. buck.

Investors are watching Surgut’ h accounts closely after the U. T. Treasury earlier this month incorporated Chief Executive Officer Vladimir Bogdanov in a sanctions list. That has raised concern within Russia that Surgut could also arrive under sanctions. The penalties can mean the company is left trapped with dollars it can’ to easily use as banks, companies and customers likely to steer clear.

Buck Fans

Surgutneftegas prefers to maintain nearly all its huge cash hoard within U. S. dollars

SOURCES: Surgutneftegas, Bloomberg

NOTE: Numbers show cash and cash equivalents, banking deposits. Surgutneftegas didn' to provide breakdown for FY2017

Similar penalties against Ruskies billionaire Oleg Deripaska and his United Co. Rusal have already caused marketplace convulsions as the company’ s companies and banks have frozen negotiations with the aluminum giant.

Should Surgut faces sanctions similar to Rusal, the business could have problems using the dollars because all such transactions are supervised by the U. S., said Alexei Panich, a partner at an international law practice Herbert Smith Freehills. Russian banking institutions may continue to hold dollar build up under existing contracts but Surgut may face difficulties in increasing tenures and putting more money in.

The lion’ s i9000 share of the company’ s money is in long-term deposits in state-run Sberbank PJSC , according to a person close to the essential oil company. The bank held 44 % of Surgut’ s deposits this year, the last time it disclosed the data. Most of the remainder was with VTB PJSC, Gazprombank JSC and the nearby unit of Italy’ s UniCredit SpA .

Surgutneftegas, Sberbank and UniCredit declined to opinion. Others didn’ t respond.

Surgut was included in Oughout. S. sanctions imposed in 2014 over Russia’ s role within the deadly Ukraine conflict. Those decreases targeted some technology supply plus access to foreign capital markets, which usually aren’ t vital for the business and haven’ t affected the operations.

Surgut doesn’ t borrow as it spends sufficient money to keep output flat plus avoids acquisitions. The company’ s i9000 owners are a mystery. Run simply by Bogdanov, one of the last so-called crimson directors, or former Soviet supervisors, still in charge, it is owned mainly by its employees, according to community statements from government officials.

Who Owns The Money

Bogdanov, 66, cemented his keep over Surgutneftegas in the mid-1990s, once the cash-strapped government emerging after the failure of the Soviet Union auctioned away Russia’ s industrial jewels. Surgut’ s pension fund acquired forty percent of the company, which a couple of years later was divided among 2 dozen legal entities with interlocking ownerships, all registered in the associated with Surgut, according to bankers working with the particular producer and its managers.

These entities and their successors had about 1 trillion rubles in long-term investments in the business at the end of 2016, according to Russia’ s i9000 Spark-Interfax legal database, giving them over 75 percent. None has more compared to 5 percent at any given time, meaning the company isn’ t obliged to disclose their titles.

Bogdanov, who formally owns less than 1 percent, has said the money pile would help the company within a crisis.

“ This individual knows he can’ t make use of this money personally, ” Alexander Ryazanov, a former deputy head of gasoline exporter Gazprom PJSC , who has known Bogdanov for more than 20 years, said within an interview three years ago .