Rosneft Retreats to 10-Month Low as U.S. Sanctions CEO Sechin

OAO Rosneft, the world’s largest publicly traded oil producer, fell to the lowest level in 10 months in Moscow after the U.S. included Chief Executive Officer Igor Sechin in a sanctions list.

The shares lost 1.7 percent to 219.80 rubles by the close in the Russian capital, declining for a sixth day to the lowest since June 19. Rosneft’s global depositary receipts slumped 1.8 percent in London to the weakest level since September 2012. The company was among six government-related entities whose ratings were cut to BBB- by Standard & Poor’s, the lowest investment grade, after the shares stopped trading.

“It’s pretty unpleasant when the CEO of the biggest oil companies is placed on such a list,” Alexei Kokin, an analyst at UralSib Financial Corp., said by phone. “It’s really important to find out whether the company itself will be sanctioned in the future.”

The Obama administration imposed penalties on Sechin and six other Russian officials, as well as 17 companies linked to Russian President Vladimir Putin’s inner circle in the banking, energy and infrastructure industries. The sanctions are being imposed in conjunction with the European Union, which added 15 names to its list today.

American companies and individuals aren’t banned from doing business with Rosneft as the sanctions against Sechin don’t apply to the oil producer, a U.S. Treasury official said today, who requested anonymity to provide additional details on the sanctions announcement.

S&P Downgrades

S&P’s downgrades today come after the sovereign was reduced to one level above junk last week. The ratings agency has a negative outlook on companies including OAO Gazprom and Federal Grid Co., mirroring its view on the country, it said.

Russia’s stock index has suffered the world’s worst losses this year as Putin annexed Ukraine’s Crimea peninsula, prompting the worst standoff with the U.S. and its allies since the collapse of the Soviet Union. Rosneft has dropped 13 percent so far in 2014, compared with a decrease of 14 percent for the benchmark gauge in the period.

The U.S. and EU say Russia hasn’t lived up to an accord signed April 17 in Geneva intended to defuse the crisis in Ukraine. The Obama administration warned it’s prepared to levy additional penalties to hit the broader Russian economy if Putin sends troops into Ukraine.

‘Biggest Risk’

Russia’s economy may halt or contract in the second or third quarter, Maxim Oreshkin, head of the Finance Ministry’s strategic forecasting department, said last week. Growth in the country of about 140 million is set to slow to 1 percent in 2014, the lowest since a recession in 2009, according to the median of 40 forecasts compiled by Bloomberg.

Shares of BP Plc lost as much as 1.9 percent in London, the most since March 20, before closing 1 percent lower. BP holds a 19.75 percent stake in Rosneft and its CEO, Bob Dudley, has a seat on the oil company’s board.

The seizure of international inspectors by pro-Russian separatists last week raised the stakes in the crisis after Russia began military exercises on Ukraine’s border, where the North Atlantic Treaty Organization says Putin has massed about 40,000 troops.

“Russia has done nothing to meet its Geneva commitments and in fact has further escalated the crisis,” the White House said in an e-mailed statement today.

Most stocks on the Micex Index gained after the sanctions were announced. OAO AK Transneft, whose rating was also lowered at S&P, added 2.3 percent, while OAO Sberbank, which advanced the most on the benchmark, increased 5 percent.

“We did not get a major bank sanctioned, which was the biggest risk,” Luis Saenz, head of equity sales and trading at BCS, said by e-mail. “On the flip side, we did get Sechin on the list, which opens the door for lots of future complications.”

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