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. Last Updated: 07/27/2016

NEWS ANALYSIS: Sibneft Deals 'Simplify Holdings'




Oil major Sibneft's decision to transfer 39.87 percent of its shares to Rosbank's custody was aimed at helping shareholders reshuffle their holdings before the company's share register goes public next year, a Sibneft spokesman said Tuesday.


The Sibneft spokesman - who said his name could not be published - explained the move as part of preparations to make the firm's dealings more transparent by revealing more details next year on the actual nature of shareholdings in the secretive oil major.


"Many shareholders are tidying up and simplifying their holdings," the Sibneft spokesman said in a telephone interview. "Last month we announced we'll be opening up our share register ... this is simply an administrative reorganization."


Rosbank - which runs Russia's largest, most efficient share depository - on Monday became the nominal holder of a 39.87-percent chunk of Sibneft belonging to Financial Oil Corp., which holds 48.58 percent of the company's stock.


At the same time, Financial Oil Corp. transferred a 7.41-percent stake in Sibneft to Runicom Ltd., an oil trading company that now holds 15.47 percent of the oil major.


Both Financial Oil Corp. and Runicom are reportedly controlled by Roman Abramovich, a somewhat mysterious tycoon widely credited as the man who controls Sibneft, Russia's fifth-largest oil company, with a market capitalization of $1.6 billion.


On media reports that the remaining 1.3 percent - worth $20.9 million - had been transferred to unknown hands, the spokesman had no comment.


"It's so small, I wouldn't comment anyway," he said.


The 39.87-percent stake will now be registered under Rosbank's name - although it remains the property of Financial Oil Corp. - providing potential cover for share sales or transfers from one beneficial owner to another without public knowledge of the deals.


The opening of that share register should put to rest years of political speculation that Kremlin insiders Boris Berezovsky and Abramovich are the true owners of the oil major.


One media report has linked Abramovich to companies that control more than 90 percent of Sibneft stock, including Runicom Ltd., a Gibraltar registered company once represented by Abramovich in Moscow, and Financial Oil Corp. Kommersant newspaper Tuesday ascribed Financial Oil Corp. to Berezovsky's control.


Speculation among analysts and the Russian press regarding the reasons behind the maneuver ranged from rumors of a planned outright sale of Sibneft stock to Rosbank to talk that it was part of a cryptic scheme for allowing nonresident holders of cash from restructured GKOs to repatriate some of the funds.


A more likely possibility would be for Sibneft to sell a small stake to an outsider. Prime-Tass reported Monday thatan unidentified Sibneft representative had said the stake could be transferred to an "independent nonresident institution."


Share sales could theoretically provide a complicated escape route for nonresidents looking to repatriate cash they received under the government's harsh restructuring terms for the ruble-denominated debt it defaulted on in August 1998. Most of that money is held in special S accounts, which are hedged around with a range of rules designed to prevent the money deposited in them from leaving Russia.


Nonresidents could use the rubles stuck in the S accounts for one of their few legal purposes - to buy stock traded on the Moscow International Currency Exchange, such as Sibneft shares.


A possible scheme - as laid out by an analyst who asked not to be identified - would work as follows: A current Sibneft shareholder sells stock to a nonresident, receiving in return rubles from the nonresident's S account.


The nonresident then resells the Sibneft stock back to the original shareholder through offshore proxies - receiving hard currency abroad in return for handing over the shares in Russia. The Sibneft shareholder ends up with his original holdings, plus a commission on the sale.


However, such gray-market operations would be highly risky. If the Central Bank caught the parties, the operations could be declared invalid and Sibneft owners might not be ready to risk large chunks of stock with only a commission as a premium.