Rosneft’s $5.3 Billion Oil Deal May Lift Ruble, Yudaeva Says

Updated on
  • Rosneft says it won’t need to sell FX to buy Bashneft
  • Ruble appreciates to strongest level in almost one year

Rosneft PJSC’s $5.3 billion deal to buy control of a smaller rival could increase the value of the ruble if Russia’s biggest oil producer converts dollar holdings to fund the purchase, according to a senior central banker.

“It may have a slight effect on the ruble, which -- all things being equal -- may temporarily strengthen,” Bank of Russia First Deputy Governor Ksenia Yudaeva said in an interview in Washington.

Vladimir Putin’s government gave Rosneft permission to buy a 50.08 percent stake in Bashneft PJSC this week as Russia pushes ahead with state-asset sales aimed at plugging the widest budget deficit in more than half a decade. Rosneft may need to convert as much as $3 billion of foreign assets into rubles for the deal, potentially extending the best rally in emerging-market currencies in the past month, Raiffeisenbank JSC analysts said in an Oct. 4 note.

Rosneft has already accumulated the funds necessary to buy Bashneft and won’t affect the currency market, Interfax reported, citing the company’s spokesman, Mikhail Leontyev. The oil producer doesn’t plan to sell dollars for the deal, he said.

In 2014, Rosneft Chief Executive Officer Igor Sechin fended off accusations that a record $9 billion issue of ruble bonds had helped push the Russian currency to a record low, saying it wasn’t selling the proceeds to buy foreign currency.

While a stronger ruble can help tame inflation, its gains shrink the value of oil exports in local-currency terms, depriving the government of revenue. When the ruble reached similar levels in July, Putin warned his prime minister in televised comments that its appreciation relative to oil should be watched.

The ruble is set for its third weekly appreciation, strengthening to 61.9525, the highest level since October 2015.

Investors are betting there will be “strong demand” for the currency as a result of the Bashneft privatization, Sberbank CIB analysts, including Tom Levinson, wrote in an e-mailed note on Friday.

(Updates with reported Rosneft comment in fourth paragraph.)
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