Russia's largest oil company sinks to 10 month low

Bloomberg/Fuel Fix:
OAO Rosneft, the world’s largest publicly traded oil producer, fell to the lowest level in 10 months in Moscow after the U.S. included Chief Executive Officer Igor Sechin in a sanctions list.

The shares lost 1.7 percent to 219.80 rubles by the close in the Russian capital, declining for a sixth day to the lowest since June 19. Rosneft’s global depositary receipts slumped 1.8 percent in London to the weakest level since September 2012. The company was among six government-related entities whose ratings were cut to BBB- by Standard & Poor’s, the lowest investment grade, after the shares stopped trading.

“It’s pretty unpleasant when the CEO of the biggest oil companies is placed on such a list,” Alexei Kokin, an analyst at UralSib Financial Corp., said by phone. “It’s really important to find out whether the company itself will be sanctioned in the future.”

The Obama administration imposed penalties on Sechin and six other Russian officials, as well as 17 companies linked to Russian President Vladimir Putin’s inner circle in the banking, energy and infrastructure industries. The sanctions are being imposed in conjunction with the European Union, which added 15 names to its list Monday.

American companies and individuals aren’t banned from doing business with Rosneft as the sanctions against Sechin don’t apply to the oil producer, a U.S. Treasury official said Monday, who requested anonymity to provide additional details on the sanctions announcement.

S&P’s downgrades Monday come after the sovereign was reduced to one level above junk last week. The ratings agency has a negative outlook on companies including OAO Gazprom and Federal Grid Co., mirroring its view on the country, it said.

Russia’s stock index has suffered the world’s worst losses this year as Putin annexed Ukraine’s Crimea peninsula, prompting the worst standoff with the U.S. and its allies since the collapse of the Soviet Union. Rosneft has dropped 13 percent so far in 2014, compared with a decrease of 14 percent for the benchmark gauge in the period.
There is more.

You have to ask why there companies are not banned from doing deals with the Russian entities?  The sanction regime has been less than robust and there is certainly plenty of room to ratchet up the the sanctions at this point.  The market reaction appears to be based on a belief that the Russians will remain intransigent and the sanctions will in fact have to be made tougher.


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