Financial regulators in Rome are examining whether Intesa Sanpaolo’s financing of a €10.2bn investment in Russian oil group Rosneft complies with sanctions.
Glencore, the commodities group, and the sovereign wealth fund of Qatar are taking a 19.5 per cent stake in Rosneft.Intesa Sanpaolo, Italy’s largest bank by market capitalisation, is providing most of the $7.4bn of finance for the deal.
Rosneft is subject to EU and US sanctions following Russia’s seizure of Crimea in 2014. EU officials examining the investment have contacted national agencies in Italy and Britain, where Glencore has its main stock market listing, because member states are responsible for implementing and policing European sanctions.
“The matter is under consideration in Rome,” said a European diplomat who is familiar with the case. An Italian official confirmed that the deal was being scrutinised.
In Italy, the body responsible for sanctions is the financial security committee, which operates under the ministry of the economy and finance with the involvement of Italy’s central bank. The Bank of Italy had no comment on the case.
Carlo Messina, Intesa Sanpaolo chief executive, told reporters on Thursday that the bank was “an adviser to the privatisation on behalf of the controlling entity of Rosneft, which is not subject to any sanction or embargo”.
He added: “We are in competition with European and US banks, working on this privatisation. We are in competition with all the other entities that wanted to get on this deal and instead they didn’t.”
The scrutiny of the deal comes as a US regulator acted against Intesa Sanpaolo in a separate matter for violating anti-money laundering and bank secrecy law, hitting the bank with a $235m fine for failing to stop suspicious transactions.
Under the structure of the Rosneft transaction, Qatar is to invest €2.5bn and Glencore €300m for equal stakes in a special purpose vehicle that is buying a 19.5 per cent stake in the oil group from Rosneftegaz, its government-owned parent company.
Glencore has said the transaction “is in compliance with applicable sanctions laws”. A company spokesman declined to comment on whether it had been approached by UK regulators in connection with any examination of compliance with sanctions against Russia.
A British government spokeswoman said London: “takes its responsibilities to ensure that sanctions are implemented and enforced extremely seriously”, and added that UK authorities worked alongside international partners “to take action where appropriate”.
Rosneft is a sanctioned entity, therefore we have to look at how they’re going to provide the financing: that’s exactly the point we have to look at to understand whether or not it’s a sanctions violation
The US and EU sanctions against Rosneft prohibit providing the Russian company with long-term financing and selling it equipment for certain oil projects, but they do not outlaw buying and selling its equity.
As such, a simple transaction for a western company like Glencore to buy Rosneft shares from the Russian government would be unlikely to fall foul of the letter of the sanctions.
However, the financial structure of a deal involving Qatar and Glencore, which the commodities group has said also involves Russian banks, is significantly more complex. A number of Russian banks are also under western sanctions.
If western regulators believe the deal is a way of providing financing either to Rosneft or to a Russian bank that is under sanctions, they could rule that it violates sanctions.
“Clearly this was not what we were hoping for when we implemented sanctions,” Amos Hochstein, US special envoy for international energy affairs, told Bloomberg last week. “Rosneft is a sanctioned entity, therefore we have to look at how they’re going to provide the financing: that’s exactly the point we have to look at to understand whether or not it’s a sanctions violation.”
Rosneft did not respond to a request for comment. A person close to Rosneft said last week that the deal “does not fall under sanctions”.
“The new shareholders have prepared themselves for the deal. They are global investors and they have done a large amount of work ahead of the deal,” he added. “For all the regulatory bodies it is a completely comfortable deal. The largest international legal companies provided the legal opinion.”
Additional reporting by James Politi
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