Russia's Rosneft signs further oil products supply deal with BP

June 27 (Reuters) - Rosneft signed on Friday its second major agreement with BP since sanctions were imposed on the Russian oil company's chief executive, a close ally of President Vladimir Putin, over Russia's involvement in the Ukraine crisis.

The five-year agreement will supply BP with up to 12 million tonnes of refined oil products and involves a pre-payment of at least $1.5 billion arranged by leading global financial institutions, Rosneft said.

Rosneft refined nearly 90 million tonnes of oil last year, according to company figures.

Some Western firms have been wary of investment and business in Russia since sanctions were imposed over the crisis in Ukraine, where Moscow denies accusations of orchestrating a rebellion by pro-Russian separatists.

But the sanctions have had only a limited impact on the Russian energy industry, a cornerstone of the country's $2-trillion economy, resulting mostly in higher borrowing costs for domestic companies.

Since the sanctions were imposed, executives from Total , BP , Statoil and ExxonMobil have visited Russia, underlining the importance they attach to business with the world's leading oil producer with current output of around 10.5 million barrels per day (bpd).

Last year, Rosneft announced deals worth more than $15 billion to sell crude oil and other products to BP, which now owns almost a fifth of Rosneft following Rosneft's acquisition of Anglo-Russian oil firm TNK-BP last year.

Friday's signing also follows an agreement by BP and Rosneft in May to jointly explore in Russia for hard-to-recover shale oil.

Such deals do not violate sanctions over the Ukraine crisis because Rosneft has not been included on any sanctions list, but Rosneft's chief executive Igor Sechin had a visa ban and asset freeze slapped on him by the United States after Russia annexed the Black Sea peninsula of Crimea from Ukraine in March.

"I am working here with Rosneft. It's a business between the companies. I don't comment on personal sanctions," BP's chief executive Bob Dudley told reporters in Khabarovsk in Russia's far east after attending the signing ceremony with other members of the Rosneft board of directors.

Sechin told reporters that he had no accounts or assets in the United States but he felt the impact from sanctions.

"Sanctions don't allow me to see the beauty of their (U.S.) nature, to learn their culture, show my kids their nature," he said. "I wanted to take a motorbike trip across America but this decision denies me such an opportunity."

Eight banks have signed a $2-billion prepayment facility backing the long-term delivery of crude oil products between Russian oil giant Rosneft and BP, Rosneft said on Friday.

The banks include Deutsche Bank, Bank of China, Societe Generale, Bank of Tokyo-Mitsubishi and Sumitomo Mitsui Banking Corporation, two banking sources close to the deal said.

Rosneft also said the prepayment facility will increase further as several other banks also have shown interest in joining the deal, adding that supplies to BP could start next month.

Bankers earlier this month said partly state-owned UK lender Lloyds Bank had pulled out of the $1.5-$2 billion trade finance deal to avoid risking any political embarrassment for its government.

Under the terms of the latest deal, Rosneft said oil product deliveries could be substituted for supplies of oil but gave no explanation of the circumstances under which this could happen.


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Such pre-payment supply deals have raised billions of dollars for Rosneft, which borrowed $30.1 billion in two separate loans in 2012 and 2013 to help finance last year's $55 billion acquisition of TNK-BP, once Russia's third largest oil producer.

Last year Rosneft also agreed an $8.32 billion loan with commodity traders Glencore and Vitol and a $1.5 billion pre-payment loan with Swiss-based trading house Trafigura.

However, some Russian energy companies have recently been talking to their customers about a possible switch to using currencies other than the U.S. dollar in transactions to minimise sanction-related risks.

Other companies could also now follow the example of Surgutneftegas , Russia's fourth-biggest oil producer with an average daily output of 1.2 million barrels of crude, which according to its accounts has stockpiled over 1 trillion roubles ($30 billion) of cash instead of paying out higher dividends or making large acquisitions.

Meanwhile Lukoil , Russia's second-biggest oil producer, has postponed an up to $2 billion Eurobond issue until the autumn because of a spike in borrowing costs. 

Source: Reuters

U.S. judge says bank should return Argentine bond payment

 A U.S. judge on Friday called Argentina's decision to make a sovereign debt payment in defiance of a court order an "explosive action" and told Bank of New York Mellon to return the money to the government.

U.S. District Judge Thomas Griesa in New York told lawyers representing Argentina and BNY Mellon that any attempt to make payment to bondholders without complying with his court is illegal.

"It cannot be done and it will not be permitted by this court. I want the banks involved to know that. This payment cannot be made and anyone who attempts to make it will be in contempt of this court," said Griesa, who was appointed to the court by U.S. President Richard Nixon in 1972.

On Thursday, Argentina deposited $539 million in BNY Mellon’s account at the Central Bank of Argentina intended only for bondholders who participated in two sovereign debt exchanges in 2005 and 2010. 
The deposit was made, Argentina said, in order to meet a June 30 coupon payment deadline. There is a 30 day grace period,

however, before a default can be declared if exchange bondholders do not receive their money.

Argentina was ordered by Griesa in 2012 to pay holdouts, who did not participate in the debt exchange, $1.33 billion plus interest on unrestructured bonds stemming from the country's $100 billion default in 2001-2002. The order was denied a hearing by the U.S. Supreme Court on June 16, effectively upholding the holdout's victory in the U.S. 2nd Circuit Court of Appeals.

Holdout investors are led by Elliott Management's NM Capital Ltd and Aurelius Capital Management, two hedge funds that specialize in buying up deeply discounted or distressed debt and negotiating profitable settlements, often through the use of the courts.

BNY Mellon in court confirmed Thursday's deposit was made into its account and told Griesa it was seeking to comply with his orders.

"Those funds remain in that account. Nothing more has happened," BNY Mellon's lawyer Eric Schaffer of Reed Smith told Griesa.

Griesa's order says Argentina cannot pay exchange bondholders without also paying the holdouts at the same time under the pari passu, or equal treatment, clause in the original bond contract.

"The money should be returned to the republic. Simple as that," Griesa said, adding that Argentina should get back to the negotiating table. Earlier this week, the judge appointed New York financial trial lawyer Daniel Pollack as a special master to help facilitate a settlement between Argentina and the holdouts.

Pollack told Reuters via email he was in court during the hearing and said he was “making every effort to get the parties to the table.”

Source: Reuters

EU Signs Pacts With Ukraine, Georgia, Moldova

The WSJ reports,"the European Union and three of Russia's neighbors signed sweeping trade-and-political agreements Friday, pushing the bloc's influence eastward but potentially provoking fresh tensions with Moscow.

The deals with Ukraine, Georgia and Moldova, which lower trade barriers and promote democratic reforms, were years in the making but faced doubts recently as Moscow stepped up its opposition. Russia, which annexed Ukraine's Crimea region in March, has said it might retaliate against the three countries by curtailing trade ties.

But EU leaders want to show they won't let a newly aggressive Russia deter them from welcoming countries into the European orbit. Many nations on Russia's periphery have become more eager to align with the EU as a way to protect themselves against potential Russian threats.

The leaders of Ukraine, Georgia and Moldova said Friday that the agreements are a pivotal step in aligning their countries permanently with Europe. Ukrainian President Petro Poroshenko stressed the rapid changes engulfing his country in recent months, including street protests and the previous government's ouster, that led to this moment".

What a great day—maybe the most important day for my country after independence day," Mr. Poroshenko said as the heads of all 28 EU countries looked on. "It shows how dramatically things can change in a short time, if the will of the people is strong enough."

But leaders of both sides warned of challenges ahead. EU officials stressed that the three countries must keep up their reforms. Mr. Poroshenko said the EU must stand by Ukraine as it goes through a tough transition in the face of Russian displeasure.

"Will Europe be free, or partly free?" said Mr. Poroshenko, elected in May. "Will it have to worry about more war and annexation, or will it be confident in the future? These aren't idle questions, and the answer will depend on the success or failure of documents we sign today."

Herman Van Rompuy, president of the European Council, the assembly of EU heads of state and government, appeared to address Moscow when he said, "There is nothing in these agreements, nor in the European Union's approach, that might harm Russia in any way."

But the Kremlin has made it clear it sees the deals as a threat to its rightful sphere of influence. Moscow has said recently it might scale back trade ties with its neighbors if they sign such pacts, and after Friday's signing the Russian Foreign Ministry warned of serious consequence for Ukraine.

The deals are part of an eastward-looking EU strategy launched in 2009, with an EU-Ukraine agreement always the centerpiece. Azerbaijan, Belarus and Armenia, which last summer suddenly decided to tear up its draft agreement with the EU, turned down similar bilateral pacts.

Former Ukrainian President Viktor Yanukovych's refusal to sign an EU association agreement led to weeks of street protests and finally to his ouster.

The continuing tensions with Russia over Ukraine are a major topic of Friday's gathering of EU leaders in Brussels, although no new sanctions are expected. Russia's relations with Georgia and Moldova are also delicate, and the EU's choice to push ahead and sign deals with them could anger Moscow.