Vostok sale announced then refused

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By Jack Farchy, Ben Bartenstein and Archie Hunter

(Bloomberg) – A trading house that owns part of a stake in Russia’s flagship oil project said its share was sold for next to nothing to a newly created company. And then he said no.

The about-face from Mercantile & Maritime, which last year teamed up with major oil trader Vitol Group to buy 5% of Vostok Oil for 3.5 billion euros ($3.5 billion), is the latest example of the opacity surrounding the Russian energy sector since the invasion. from Ukraine.

Ships carrying Russian oil have turned darkRussian companies stopped publishing large amounts of data and major assets were transferred to little-known buyers.

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In annual accounts filed in Singapore on September 29, Mercantile & Maritime Investments Pte said that following European Union and Swiss sanctions against Russia, it “had to dump” its investment in Vostok Oil. , a huge project headed by the state champion Rosneft. PJSC which, before the war, was valued at $85 billion.

“Given the circumstances and the evolution of the sanctions, the Group sold its investment in Amur to Fossil Trading, a company incorporated as a free zone company in Dubai, on July 22, 2022 for CHF 100,000”, a- he declared.

Amur is the name of the joint venture, 75% owned by Vitol and 25% by Mercantile & Maritime, through which the two companies acquired the stake in Vostok last year.

Fossil Trading was registered in Dubai on April 26, according to registry documents viewed by Bloomberg. It also owns Energopole SA, according to the website of Energopole, a Swiss business unit that was created by Rosneft following the imposition of US sanctions in 2020 against Rosneft Trading SA.

However, in response to questions from Bloomberg, Mercantile & Maritime said its financial statements contained “certain misstatements”.

“For the avoidance of doubt, although Mercantile & Maritime Investments Pte Ltd remains an indirect minority shareholder of Vostok Oil LLC, we are in advanced discussions to divest our stake. While these discussions are ongoing, we refrain from commenting further except to confirm that such assignment would be for a third-party buyer not affiliated (directly or indirectly) with an existing Vostok stakeholder,” he said.

“We never considered selling our indirect minority stake in Vostok to a subsidiary of Rosneft,” he added.

Following Bloomberg’s investigation, Mercantile & Maritime filed a set of corrected financial statements on Oct. 26 in Singapore, which only stated that the company “intends to divest its stake in the Amur Group” to “a third party.” “. In its Singapore Business Registry Error Notice, it described the type of error as: “Clerical/typographical or other errors”.

Also missing from the corrected filing was a passage describing the profits from “additional business activities” related to the Amur investment, which the original filing said was “sufficient to offset the loss on disposal of the investment.”

A Vitol spokesperson declined to comment. The trading house said in early July that it had “agreed to sell its shares” in Vostok and was “in the process of completing the legal formalities necessary to complete this transaction”, but did not provide an update. day since.

Rival trader Trafigura Group said in July it had sold its 10% stake in Vostok to a newly created trading company registered in Hong Kong for an undisclosed sum. A person familiar with the transaction said at the time that the owners of the company were not Russian.

Commodity traders recorded their biggest profits this year as the invasion of Ukraine and subsequent sanctions against Russia created upheaval and wild price swings.

And although their investments in Russia have become a headache for traders, in some cases they have also generated significant profits.

In its financial statements, Mercantile & Maritime – which is owned by veteran trader Murtaza Lakhani – warned that the impact of Western sanctions on Russia “could affect the group’s ability to continue trading”. However, he said he had refocused on other markets since the sanctions and that, since he had no major external debts, the situation “does not impact the ability of the Group to continue to operate as a business for the foreseeable future.”

Yet September’s Mercantile & Maritime dossier also highlighted the dramatic profits generated by trading Russian oil. While the company said it would lose almost all of the $295 million it invested to buy its share of the joint venture with Vitol, it also pointed out that it had received “economic benefits from activities additional business terms” of the “Amur-related arrangement”. investment” totaling $295 million in gross profit in ten months. Of that amount, it grossed $65 million between October and December 2021 and $230 million between January and July 2022.

“Accordingly, management has declared that the total gross profit generated by these additional business activities is sufficient to offset the loss on the disposal of the investment,” the filing states.

This passage no longer appeared in the amended set of accounts filed in October.

Vitol, which invested $886 million for its 75% share in the joint venture, did not specify the profits generated from the associated commercial contracts. In its latest annual report, it said the Amur joint venture recorded a loss of $506 million in 2021, which a person familiar with the matter said was the result of impairment. Vitol made nearly $4.5 billion in the first half of 2022, Reuters reported, shattering its earnings records.

© 2022 Bloomberg L.P.

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