“The glue of the sanctions is starting to dry,” mused Sergio Trigo Paz, head of emerging market fixed income at BlackRock, the world’s largest asset manager. Investors fret that holders of Russian corporate bonds might not receive interest payments because a “blocked person” has a large stake in the company, he said. “All transactions could start to freeze.”
That was in mid-May. Now, the glue has dried: Igor Sechin, CEO of Russian oil company Rosneft and a major shareholder, whose name graces the “Specially Designated Nationals and Blocked Persons List,” is begging the Russian government for a $41.6 billion bailout in response to the sanctions.
The company has net debt of $44.5 billion, the hangover from its $54 billion acquisition of TNK-BP last year. But the US sanctions ban loans to Rosneft with maturities over 90 days, and EU countries are sticking to these sanctions as well. So dealing with this debt and paying dividends is going to be tough.
And the advance payments from China from the Holy-Grail gas deal that analysts had seen washing over Rosneft? $63 billion between 2014 and 2018, according to Raiffeisenbank’s energy specialist in Moscow, Andrey Polishchuk, who didn’t think Rosneft would have any problems paying its debts and dividends “until 2019.” A hype-ventilating analyst’s pipedream for now.
But Russia’s National Wealth Fund, where the bailout money is supposed to come from, already doled out much of its $86 billion for other projects and cannot fund the bailout, according to the Vedomosti newspaper (picked up by Reuters). The paper cited government sources and a letter from Prime Minister Dmitry Medvedev that asked officials to analyze the request, which one of the unnamed officials called “horrible.”
Thus, the sanctions are beginning to wreak havoc. Everywhere. German industrialists and exporters have long complained about them. CEOs step up to the microphone on a near daily basis and, after pronouncing the requisite pledge to submit to the “primacy of politics,” slam the sanctions and the impact they have on their companies. They’ve been doing this for months, trying to jawbone the German government into compliance with their needs.
Now the official results are in. And they’re ugly.
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