The planned sale of 49% in India’s Essar Oil to Russian giant Rosneft may have run afoul of the US, which has Rosneft on the list of sanctions it had imposed over Russia’s annexation of Crimea, Oil Price reported, citing a report on The Times of India.
According to the Indian daily, many Indian banks, which are heavily exposed to Essar Oil with extended loans, may be reluctant to back the sale, which is estimated to be worth some $3 billion, for fear of facing scrutiny and reaction by the US.
“We may have to review our exposure to Essar Oil if Rosneft comes on board,” a top banker with a state-run lender told The Times of India. In March of this year, Rosneft confirmed its interest to buy into the share capital of the Indian company. The two parties had also agreed that Rosneft would deliver crude to Essar Oil’s Vadinar refinery. The deal, however, has not been yet officially sealed. Essar Oil’s owners, the Ruias family, had initially sought to sell 74% to Rosneft, but reduced the share to 49% to avoid the company being categorized as a subsidiary of a group that has US sanctions imposed.
Regarding the sale of the other 25% in the 74% stake that is up for sale, Essar Oil has been in talks with oil trader Trafigura Group. However, Trafigura has close relations with Rosneft since it handles much of Russia’s crude exports, and this 25% sale hinges on the Rosneft deal being completed, the report added, citing banking and energy sources. Earlier this month, Essar Oil’s chief executive said the firm would reduce its purchases of Iranian crude oil once the deal with Rosneft is complete.
Currently Essar Oil is the biggest single importer of Iranian crude into India, and this may be about to change, as Rosneft will want to take the lion’s share of supplies to Essar’s facilities.
