How Trafigura helps Rosneft to sell oil to the West in the conditions of sanctions

The trader is rapidly becoming the largest independent seller of Russian oil.
In September 2015 the president of "Rosneft" Igor Sechin, having descended from the podium raw materials conference in Singapore organized by the Financial Times (FT), rushed to one of the traders, who stood modestly aside. The man whose head of state-owned companies embraced and kissed on both cheeks, was Jonathan Kollek, the head of the Eurasian division of a major European trader Trafigura commodity. Those present watched in amazement rare by today's manifestation of the warm relations of the Russian state-owned companies with a European partner, wrote the correspondent for the FT.

It is up to Kollek, as well as the general director of Trafigura, Jeremy Weir depended, would come out with a new level of relationship with their company "Rosneft", which line up with such persistence founder of Trafigura, Claude Dauphin (cm. Incision) at the end of September 2015, who died of cancer in a hospital in Bogota. It is thanks to the efforts of the Dauphin in 2013 Trafigura entered into a first major deal on the Russian oil market - pre-export deal with "Rosneft" for $ 1.5 billion.

But the Dauphin did not plan to stop.

In the summer of 2016 can be considered: his successors all turns out. Trafigura, the headquarters of which are located in Amsterdam and Lucerne, Switzerland, from a low-profile player in Russia became the largest after the Chinese buyer of Russian oil, reported FT and Reuters. On the supply through the western ports in Europe at Trafigura 4th place in the lead - based Vitol Kazakh transit (.. See graph) Nevertheless championship Trafigura provide large contracts with "Rosneft" for the purchase of ESPO Blend, CPC Blend, and with the end of 2015 - the variety Sokol - a total of about 1 million tons per month, Reuters explains the analyst Olga Yagova.

On Trafigura world market - which for so long sought Dauphin - ahead of Glencore and became the second independent oil trader after Vitol. Trafigura in the June report said that since October 2015 in April 2016 sold more than 4 million barrels of crude oil and refined fuel a day against 2.7 million barrels a day the previous year - thanks to the expansion of cooperation with "Rosneft", increase the supply of Latin America, as well as the supply of shale oil in the US. Glencore is reported on the shipment in the same period to 3.2 million barrels per day. Vitol to ship in 2015 to about 6 million barrels of crude naveand petroleum products per day to 5 million barrels a day a year earlier.

In fact, Trafigura has taken place, once belonged to Gunvor, which has created another President Vladimir Putin Gennady Timchenko, and for many years remained the largest partner of "Rosneft". Trafigura and "Rosneft" is not just a buyer and a seller - in essence, they create a joint trading unit to operate on Western markets, say people close to the management of both companies.

But among the owners of Trafigura, including and traders, and top managers, had no friends Russian leaders childhood. How she managed to win the trust of the largest oil producer in Russia?
sales history

Until 2012 the largest trader Urals was Gunvor, a major owner of which was then Timchenko. The company sold about 40% of Russia's oil and its annual revenue reached $ 80 billion. In 2012, for the first time Gunvor was not able to win the long-term requirements of "Rosneft", the trader is not got the annual tenders "Surgutneftegaz" and TNK-BP. In 2012, the share of Gunvor in exporting Russian Urals has reduced long-term contractss up to 15%, evaluated by Reuters.

The winners of the tenders for long-term Russian oil exports have become international traders Vitol, Glencore and oil company Royal Dutch Shell.

Possible reasons for the decrease of Russian oil exports through Gunvor Reuters believed differences between Timchenko and another old friend of Putin, Sechin. "The two housewives in one kitchen does not get along" - then I confirmed this version of one of the interlocutors "Vedomosti". Sources told the newspaper that if Sechin in conversations with colleagues made no secret of irritation about the fact that Timchenko can afford to live "legal billionaire" (in 2012, Forbes estimated the state of a businessman in a $ 9.1 billion), while he was "like a humpback Papa Carlo night and day. "
Trade has not worked

In 2013, "Rosneft" swallowed TNK-BP and has become the largest public company in mining and oil stocks. At the end of 2013, "daughter" of "Rosneft" has signed an agreement with Morgan Stanley to acquire from the last oil trading business and 49% in the company Heidmar, managing a fleet of tankers. The deal includes the participation structures of "Rosneft" in suppliesx, procurement, transportation and storage of oil. More than 100 oil traders from Morgan Stanley offices in the UK, USA and Singapore - which is about a third of the staff of all trading business Morgan Stanley at the time - as well as about 180 managers from support units were to become members of the group "Rosneft".

Close the deal failed. In 2014, due to the annexation of Crimea to Russia and of hostilities in the Donbass "Rosneft" has appeared in the sanctions list of the US and EU, which prohibits the provision of financing by the western structures for more than 90 days. US regulators refused to approve the deal.

In May 2015 the head of electricity trading division of "Rosneft" Marcus Cooper acknowledged that Western sanctions have prevented the company's plans to expand trading business because of its limited ability to attract debt capital. It is also not allowed "Rosneft" in contrast to Western competitors to benefit from trading during the collapse in oil prices, he complained.

According to him, the trading departments of companies such as BP and Royal Dutch Shell, were at the disposal of billions of dollars to the spring of 2015 to capitalize on the situation due to the market contango (when futures with a later delivery time are more expensive than for delivery in the near future). Typically, the highest profit traders get, keeping the oil for several months, and then selling it at least rise in prices (in January 2016, oil was $ 30 per barrel, and in June 2016 - $ 50), but the long-term financing, which is needed for such operations the "Rosneft" and was not, Cooper explained. Nevertheless, "Rosneft" is not renounced strategy to increase representation abroad, then said Cooper.
time to help

At the height of the absorption of "Rosneft" TNK-BP, in the summer of 2013, Trafigura established a subsidiary, Trafigura Eurasia in Moscow ( "Trafigura Eurasia"). At work she settled down former employees of TNK-BP: Kollek became president of the company, from 2003 to 2012 served as Vice President of TNK-BP on trading operations, the general director - Elena Lobodina previously led the regional trading BP's, and in 2012 replaced the Kollek, TNK-BP.

According to TASS, in the autumn of 2013 TNK-BP "TrafiguDr. Eurasia "passed 15 analysts and traders. During Kollek in TNK-BP, the company has established a close relationship with Trafigura, explained the trade publication Nefte Compass.

In 2012, the idea of ​​self-trading, TNK-BP has been buried because of the opposition of the British BP, which had its own trading division. This was the reason for leaving Kollek.

Before the Russian subsidiary of Trafigura Dauphin set the task at any cost to take a significant share of oil exports. The company desperately trying to strike up a partnership with the country's largest producer, so won in tenders "Rosneft" in the notoriously unprofitable conditions for themselves, he explained to "Vedomosti" former employee "Trafigura Eurasia". "On each tanker with Russian oil company was losing $ 100 thousand," - he cited an example.

Trafigura said the fall in net profit in the second half of the fiscal year 2015 by 10% to $ 602 million. The expansion cost is not cheap, the man explains close to Trafigura.

Such a strategy in dealing with "Rosneft" is not new. Timchenko, in 2013 in an interview with the Swiss newspapere Neue Zurcher Zeitung claimed that "Rosneft" overpaid different companies hoping to start with her other business, such as in the field of mining.

Trafigura nor the production or processing was not interested: Dauphin fundamentally invested in these areas, in contrast to its competitors - Vitol and of Glencore, says a former employee of the Russian representation of the Dutch company.

Employees of the Russian office of Trafigura began to worry, he says, because the traders traditionally compensation tied to earnings from operations, however, Dauphin comforted them, recognizing that the first stage of inevitable losses and bonuses paid in cash by the other group companies.

For the absorption of TNK-BP in 2013, "Rosneft" took foreign banks $ 31 billion (two-year bridge loans to $ 24.6 billion, and the rest - for five years). At the same time the company began to actively engage pre-export financing. Advantages of prepaid lies in the fact that advances are not reflected in the total debt of the company, so they usually do not affect the covenants, in addition, advances are usually charged a lower interest rate thanof loans, although customers in exchange for an advance payment may be required to offer, explains the benefits of such financing Raiffeisenbank analyst Andrei Polishchuk.

In March 2013, "Rosneft" has signed five-year contracts for the supply of 67 million tons of oil from Vitol and Glencore prepaid nearly $ 10 billion. And three months later entered into a "deal of the century", agreeing with the Chinese state company CNPC on the export of 365 million tons of oil for 25 years with an advance payment of about $ 70 billion.

Against this background, signed at the same time, five-year contract with Trafigura for the supply of up to 10 million tons of oil prepaid $ 1.5 billion was not very noticeable. But deliveries are have to go to the middle of 2016 by 2018 follows from the statements of Trafigura. For both companies the contract was very important, says a former employee of the Russian representation of Trafigura. Trafigura has finally achieved the status of an important partner of Russia's largest oil company (for comparison: at the end of June 2014, "Rosneft" has signed a contract with BP to supply 12 million tons of petroleum products for five years with a deposit of at least $ 1.5 billion) and at the same time He earned in the eyes of "Rosneft" leadership status pomoschnika, you can count on in a difficult moment: the advance was quickly listed Russian companies, while deliveries were to begin only after three years, says the source "Vedomosti".

Quick rise

In 2014, "Rosneft" has begun negotiations with Vitol on a new contract that would provide a new advance payment of $ 2 billion, the FT reported. However, due to the sanctions the deal fell through. Cooperation "Rosneft" with Trafigura, on the contrary, it was strengthened. In 2013, "Rosneft" on a five-year contract, the trader sold 150 000-200 000 tons of oil per month. In April and May 2015, "Rosneft", according to the FT, the Dutch company has sold for about 2.5 million tons of oil.

Over the past year, Trafigura has evolved from a "small player in the Russian market" in a large, exporting more oil than Glencore or Vitol. In November 2015, Trafigura has signed a one-year contract for the supply of crude oil grades Sokol with the "Sakhalin-1" project (amounts not specified).

"Rosneft" and Trafigura have a special relationship, recognizes the top manager of "Rosneft", without giving details. In fact, now there Trafigura possozhnost receive 70% of the exports of "Rosneft", say a top manager of a Russian oil company and a person close to Trafigura. At Trafigura has an exclusive agreement with "Rosneft" on the opportunity to acquire this share at the price of the successful bidder, I heard a top manager of the oil company. As designed, these arrangements and whether they concern only oil or petroleum products as he does not know.

A former employee of "Trafigura Eurasia" explains that the company has achieved tight integration with "Rosneft", moving it to the global trading market. "Rosneft" and Trafigura are discussing the establishment of a joint business of trading, according to a person close to Trafigura. According to him, the joint venture is likely to be created on a parity basis: the sanctions it will not get any, because he did not have to raise external funding, enough own funds Trafigura, said the source "Vedomosti".

The market is considered to be that of "Rosneft" has a non-controlling interest in the oil trading business, Trafigura, says the top manager of a competing international trading company. "Rosneft" is interested in the workwith Trafigura also because it can attract through its Western financing for their projects, agree a person close to Trafigura, and the top manager of the Russian oil company.

Adjusted Trafigura total debt by the end of March 2016 amounted to $ 8.7 billion, remaining unchanged compared to the previous year, while the increase in oil supplies resulted in a net cash outflow from operating activities of $ 1.5 billion during this period, listed companies.

Despite the death of the founder of trust Trafigura creditors lost: last fall, it successfully refinanced $ 2 billion in short-term loans to 28 banks at lower interest rates than in the previous fiscal year.

Press-service of "Rosneft" did not respond to questions "Vedomosti" about the cooperation with Trafigura, CEO of Trafigura Weir said that the joint venture with "Rosneft" company has no representative declined to comment on the trader's cooperation with the state.

Given that Trafigura has won the tender for the semi-annual "Surgutneftegas" for the shipment of 200 000-300 000 tonnes per month in the Urals and from July will begin hockski, while maintaining the current volume of purchases, it can become a leader among Russian oil customers, overtaking even China's CNPC, notes Yagova.