For those who have been waiting to see the consequences of the EU’s sanctions on Russia, well… here’s your glory moment.
The world’s biggest oil producer is scaling down.
In an attempt to cut costs, Russia’s beloved Rosneft is cutting staff and selling a prized oil field to China, which is exporting more and more of its oil products.
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Now, yes, Rosneft has tons of cash, but its debt is weighing it down. What’s more, even its usual cheerleading team is having doubts, which will curtail some long-term plans…
“Rosneft has massive investment needs over the next few years to develop new oil fields, principally in the east part of Siberia, that’s north of $20 billion a year. It has about $30 billion of debt that it needs to roll over and it needs access to serious technology, most of which comes from the West, in order to develop those fields,” says Mike Ingram of BGC Partners.
Not only is Rosneft feeling the brunt of the sanctions, but there’s more to come…
Adding Salt to the Wound
More EU sanctions that limit access to Western financial markets have just been agreed to, and these really hit Russia’s oil producers where it hurts.
For now, the EU is waiting to see how the ceasefire in Ukraine holds, so the recent sanctions aren’t in full effect yet. But, they’re coming…
“Europe needs to hit hard at the leadership in Moscow, and they need to hit hard the oligarchs that support Vladimir Putin, and this is what they’re finally doing. My regret however is that they didn’t do it much earlier when Mr. Putin’s double dealing was already very apparent, but I guess the political reality was that we weren’t going to get it very quickly,” says Ingram.
As for the rest of Europe, there’s some relief. In fact, Gazprom (OGZPY) is unaffected, a very good thing for gas users since it’s Europe’s main gas supplier.
But the sting continues for Russian companies raising more than $26 million in the EU.
On top of that, another two dozen individuals will have frozen assets and will be banned from the EU.
After taking this beating, Moscow is threatening to close its airspace to Western airlines.
And “the chase” continues,
Commodities Research Team