Sanctions in spite of: how do Russian oilmen find money in Europe

In the conditions of sanctions, a number of companies managed to obtain loans under the guarantees of European export agencies, but against the backdrop of state support and loans from Chinese banks, they play a secondary role.
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In late August, the financial director of Uniper, Christopher Delbruck, said that the German energy concern may refuse to participate in the construction of the Nord Stream-2 gas pipeline if new American sanctions are introduced. About the preparation of restrictive measures for companies participating in the project in mid-August, the WSJ reported with reference to former and current US officials. If these reports are confirmed, Gazprom for the second time in three years will lose its foreign partner in the implementation of a major investment project.

Attraction of share capital

Shell was another such partner: in August 2015, the chief executive officer of the Anglo-Dutch company Ben van Berden announced his intention to enter the Sakhalin-3 project, which is operated by Gazprom. However, these plans soon broke down due to US sanctions against the South Kirinsky field of the Sea of ​​Okhotsk. Similar problems were faced by the American Exxon Mobil, which was forced to withdraw from joint ventures with Rosneft that were created for exploration and production in the Kara and Black Seas - information on the completion of transactions for the purchase of Exxon Mobil's stakes in a joint venture by a Russian company recently reported in the second quarter.

This threat has so far managed to bypass Novatek, which fell into the US sanctions list in July 2014. Sanctions did not prevent the French Total from fulfilling its shareholder obligations as part of the construction of the LNG plant in Yamal and then agreeing to enter the Arctic LNG-2 project, a 10% purchase of which was announced in May at the St. Petersburg International Economic Forum. The presence of Total can partly be explained by the nature of the sanctions against Novatek, which did not affect the raising of share capital. The status of an exclusive Western co-owner of the largest Russian LNG projects makes Total take a risk, which, however, is not yet ready for other European companies: the buyer of 9.9% in Yamal LNG, which was searched before the sanctions by Novatek, became Chinese The Silk Road Fund, among the potential investors of the Arctic LNG-2, are Korean KOGAS, Chinese CNPC and Saudi Saudi Aramco.

Credits under the guarantees of export agencies

Some industry participants also managed to break through the "credit embargo", under which all Russian banks and companies got de facto, regardless of whether they are under sanctions or not. It is no accident that the external Russian corporate debt declined by a third over the past four years - from $ 659.4 billion in July 2014 to $ 423.3 billion in July 2018, according to the Central Bank. One of the loopholes remained loans, tied to contracts with European suppliers of technological equipment, guarantees on which provide foreign export agencies.

In December 2014, Sibur agreed with a consortium of European banks on a € 1.575 billion credit line for contracts with German Linde AG and ThyssenKrupp - EP contractors for pyrolysis and polypropylene installations of Zapsibneftekhim under construction - the agreement received German guarantees agency Euler Hermes. And in September 2015, under the same project, the company raised loans for another € 412 million - the guarantor was the French agency COFACE, whose participation could be related to the contract with Technip (France) - EP contractor for the polypropylene plant, although in the reporting for 2015 Sibur did not directly indicate this.

Similarly, Nizhnekamskneftekhim (NKNKh) entered into a credit agreement with Deutsche Bank AG for € 807 million, which was also guaranteed by Euler Hermes, - the funds will be directed to the project of an ethylene complex with a capacity of 600,000 tons per year, technological partner in the construction of which will speak Linde AG. This tool is also used by Novatek for its LNG project in Yamal: in December 2016 the company raised a loan of € 750 million from Intesa San Paolo for COFACE and Italian export agency SACE, and in June last year a loan of € 425 million from Raiffeisenbank, Intesa San Paolo and other European banks under the cover of Euler Hermes and EKN (Sweden). These loans allowed Novatek not to fully choose the loans of Chinese banks, Leonid Mikhelson said, referring to the financing from China Development Bank and China Exim Bank, which in 2016 agreed to provide Yamal LNG with slightly more than $ 12 billion.

Issue of Eurobonds

Another tool is eurobonds, the sale of which in Europe in 2014 was banned for Rosneft, Transneft and Gazprom Neft. Their release remains available for Sibur, which last September placed six-year Eurobonds at $ 500 million at a rate of 4.125%. By that time, one of the shareholders of the company - Gennady Timchenko - had been under US sanctions for three years already. The sanctions risks to some extent affected the investment attractiveness of debt securities - they were less profitable for Sibur than SIBUR for $ 1.75, granted in 2015 as a bonded loan for a period of 15 years.

More significant - but in comparison with European loans - the NWF funds for Novatek, for which 150 billion rubles from the Fund were issued in the form of 15-year bonds tied to the LIBOR rate. Even more important for the company were loans of Chinese banks, which accounted for more than 40% of the total value of Yamal LNG ($ 12 billion from $ 26.9 billion) and without which the project itself would not have taken place. A secondary role is played by European loans in the financing of Zapsibneftekhim, especially since Sibur partially replaced them with a $ 400 million loan from Vnesheconombank, approved by the government last December.

This, perhaps, is the main effect of sanctions. Companies manage to find loopholes in order to attract financing in Europe, but for them it does not play a key role.