Rosneft Says ‘Illegitimate’ Sanctions Won’t Stop Investments

OAO Rosneft (ROSN), the world’s biggest publicly traded oil producer by volume, said U.S. sanctions over the Ukraine conflict were “illegitimate” and wouldn’t change the company’s strategy.

The financial position of Russia’s largest oil producer is “robust” and operating cash flow will allow current projects to continue while maintaining dividend payments, the Moscow-based company said in a statement today.

The Obama administration’s most aggressive sanctions on Russia yet, announced two days ago, will prevent Rosneft from accessing U.S. equity or debt markets for new financing with a maturity beyond 90 days. They don’t otherwise prohibit U.S. companies or individuals from doing business with sanctioned firms, which also include gas producer OAO Novatek and OAO Gazprombank.

Standoff in Ukraine

“Rosneft has no influence on either political or economic processes ongoing in Ukraine,” the state-run company said in the statement. “For this reason, the above-mentioned sanctions are illegitimate and groundless.”

Rosneft shares fell 0.8 percent to 231.75 rubles today in Moscow, taking the drop for the week to 5.8 percent, the biggest weekly slump since May 2012. The stock extended yesterday’s drop of 4.3 percent, the steepest in more than a year, after the sanctions were announced.

China Contracts

The company can afford “not to attract emergency loans” to continue to finance its projects, Chief Executive Officer Igor Sechin told reporters yesterday in Brasilia.

The Russian company will rely more heavily on China, whose clients are scheduled to provide Rosneft $63 billion of advance payments under long-term crude-supply contracts in the next four years, according to Andrey Polischuk, an energy analyst at ZAO Raiffeisenbank in Moscow. Rosneft has the highest debt burden among Russian oil companies.

Last year, Rosneft and China National Petroleum Corp. signed a $270 billion, 25-year supply agreement that will diversify Russia’s oil exports to the world’s second-biggest crude-consuming nation. In October, Rosneft also agreed to an $85 billion, 10-year supply deal with China Petrochemical Corp.

Rosneft’s Lisichansk refinery in eastern Ukraine near the border with Russia was on fire this morning, Interfax reported, citing acting head of Luhansk regional administration Irina Verigina. The area has seen heavy fighting between the Ukrainian army and pro-Russian separatists, who are suspected of downing a Malaysian Air jet that killed all 298 people on board yesterday.

To contact the reporters on this story: Will Kennedy in London at wkennedy3@bloomberg.net; Ladka Bauerova in Prague at lbauerova@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Alex Devine, Ana Monteiro

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