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. Last Updated: 07/27/2016

Transneft Management Scores Win in Stake Spat

The Finance Ministry has refused to register the results of an additional equity issuance by National Reinsurance Society, thereby nullifying the purchase of a 49 percent stake in the company by Holbrook Insurance Brokers Ltd., an England-based insurance firm.

The decision signals an important victory for the new management of Transneft, Russia's monopoly system of oil pipelines, which founded National Reinsurance Society (NPO) and was a 55.7 percent shareholder in the company.

Transneft triumphantly reported in a statement Tuesday that it retained the controlling stake.

Former Transneft management last summer undertook an attempt to issue shares and sell them to Holbrook, thereby obtaining a foreign strategic partner for the insurance business.

Ex-Transneft managers, led by former president and chairman Valery Chernayev, were prepared to do this at the expense of diluting the pipeline company's stake in NPO to 28 percent.

NPO President Leonid Khuzhamov said his company would respond to the development next week at the earliest.

Holbrook could not be reached for comment Tuesday.

NPO is Russia's second largest reinsurance company, and has the potential to cover a lucrative niche in Russia's oil industry.

The company received over $13 million in principal payments last year, and has shared insurance risk with such prestigious players in the market as Lloyd's.

Before the Finance Ministry annulled the NPO share issue, the Transneft management tried to fight the share dilution in the courts, but the Moscow Arbitration Court returned two conflicting verdicts, which left both Transneft and Holbrook claiming control over the company.

While the ministry's decision does not spell the end of the standoff, it does switch the momentum in favor of current Transneft President Dmitry Saveliev, who was picked by former Prime Minister Sergei Kiriyenko to manage the strategic monopoly.

Since taking over in the beginning of July, Saveliev has been trying to nullify much of what Chernayev did while at the helm.

The new president is hoping to win back a 12 percent stake in Transneft currently held by Benevent, a company operated by Chernayev and other former vice presidents of the pipeline monopoly.