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. Last Updated: 07/27/2016

Glencore Enters Fight for Russneft Assets

The fight for embattled oil producer Russneft intensified Wednesday as Swiss-based commodities trader Glencore announced that it had entered the race for some of the firm's assets.

Russneft has been operating without a president and formal owner since founder Mikhail Gutseriyev fled the country in August to avoid what he called politically motivated charges of tax evasion.

Basic Element, the holding company of metals magnate Oleg Deripaska, has applied for anti-monopoly approval to buy Russneft, but sources close to the deal say the oligarch has already shelled out $6 billion for the firm.

Glencore, which works closely with Deripaska's metals interests, may have been brought in to strengthen his bid for Russneft as rival Kremlin insiders hope to get their hands on the country's seventh-largest oil firm, analysts said.

Glencore, which helped fund Russneft's rapid expansion over the last five years, could also be seeking to recoup part of the $2.8 billion it is owed by the embattled firm.

Glencore applied Sept. 11 to buy minority stakes in three Russneft subsidiaries, said Irina Romanenkova, a spokeswoman for the Federal Anti-Monopoly Service. A decision on Glencore's and Basic Element's bids will be made after Nov. 30, she said.

The service was expected to rule on Basic Element's bid by Oct. 4, 30 days after the holding applied for approval. A two-month extension was granted "due to the need for additional consideration of the transactions and the receipt of additional information," the service said in a statement earlier this month.

Russneft failed to elect a president at an Oct. 5 meeting and has yet to set a date for the next vote.

Glencore spokeswoman Lotti Grenacher confirmed the trader's bid but added that the firm had no interest in buying the entire company. "Neither Glencore, nor any of its subsidiaries has made any application to the Russian Federal Anti-Monopoly Service to purchase any shares in Russneft," Grenacher said in e-mailed remarks.

Speculation has persisted that Rosneft, chaired by President Vladimir Putin's powerful deputy chief of staff Igor Sechin, is hoping to buy the firm.

Rosneft spokesman Nikolai Manvelov denied that his firm had any interest in Russneft on Wednesday, saying, "We're not planning on buying it."

The battle for assets has intensified as Putin nears the end of his term, with rival clans hoping to secure their interests before he steps down after March's presidential election.

"This is not a commercial transaction, it's a political contest," said Chris Weafer, chief strategist at UralSib.

Privately held Glencore, the world's largest commodities trader, has a strong foothold in the Russian metals and oil trade but does not release details on its commercial transactions. Its worldwide turnover in 2006 totaled $116.5 billion, with assets worth $47.1 billion.

The firm, one the most active commodities traders in Russia since the late Soviet period, was founded in 1974 by financier Marc Rich. He sold the trader to its current owners in 1994.

Rich sought refuge from U.S. justice in Switzerland after being charged in 1983 with tax evasion and busting Iran sanctions. President Bill Clinton pardoned him in January 2001.

Earlier this year, Glencore merged its alumina assets with Deripaska's Russian Aluminum and Viktor Vekselberg's SUAL to create United Company RusAl.

"If Glencore is successful in getting the assets, we can only take it to mean they have a close relationship with the Kremlin and are trusted to hold those assets," Weafer said.

Glencore has applied to buy stakes in Russneft subsidiaries Uralskaya Neft, Udmurtskaya Natsionalnaya Kompania and Agan Neftegazgeologia, said Romanenkova, of the anti-monopoly service.

Basic Element, which applied to buy Russneft through a foreign-registered unit named Continental Group Management, has not specified whether it applied for 100 percent of the firm's shares.

"We bid for control of the company," Basic Element spokesman Sergei Rybak said Wednesday. He declined to comment on whether Basic Element was ready to split Russneft with Glencore.

Several sources close to the deal say Deripaska has already paid Gutseriyev $3 billion, with an additional $3 billion guarantee, to scoop up the firm.

Gutseriyev, already worth an estimated $2.9 billion according to Forbes, has been living in London since fleeing Russia in late August, soon after the funeral of his son, who died in a car crash that remains shrouded in mystery.

Britain's Home Office refused to comment Wednesday on whether it had received a request for political asylum from Gutseriyev.

Gutseriyev stepped down as head of Russneft on July 31 after decrying "unprecedented hounding" from tax and law enforcement authorities in a public letter.

Tax authorities have brought a total of 11 lawsuits against eight current and former shareholders in privately held Russneft, and all the company's shares and assets have been frozen. Prosecutors have issued warrants for Gutseriyev's detention on charges of illegal business practices and tax evasion.

Gutseriyev founded Russneft in 2002, after leaving his post as the head of state-run oil firm Slavneft.