Tags: Treasury | Putin | Investor | oil

Treasury: Putin Is Investor in Swiss Oil Trader

Thursday, 20 Mar 2014 04:45 PM

The U.S. said Russian President Vladimir Putin is an investor in a little-known Swiss oil company backed by a billionaire, a charge that along with new sanctions threatens to bring upheaval to global energy markets.

The Treasury Department, announcing further sanctions Thursday designed to punish Putin and his associates for Russia’s actions in Crimea, targeted Gunvor Group Ltd. co-founder Gennady Timchenko.

With 2012 revenue of $93 billion, Gunvor’s one of the world’s largest commodity traders, employing more than 1,600 people and sourcing crude from more than 35 countries. Run from Geneva, Gunvor is co-owned by Timchenko, 51, and fellow billionaire Torbjorn Tornqvist, who founded the company in 2000 to handle Russian crude shipments.

The U.S. action could make oil companies, traders and banks reluctant to do business with Gunvor, affecting billions of dollars of physical and derivative contracts. When sanctions target individuals, clients should be cautious doing business with companies they control, said Behnam Dayanim, a Washington, D.C.-based partner at law firm Paul Hastings.

“Timchenko’s activities in the energy sector have been directly linked to Putin,” the Treasury Department said in a statement. “Putin has investments in Gunvor and may have access to Gunvor funds.”

Potential Impact

Gunvor said Putin has never had any ownership, beneficial or otherwise, in the company. The Geneva-based trader is “assessing the potential impact on our business” of the sanctions against Timchenko, who owns more than 40 percent, it said in a statement. The Treasury didn’t offer any material to support its claim.

“The U.S. has taken its first step in terms of sanctions against Russia that have an oil aspect,” Olivier Jakob, managing director of Zug, Switzerland-based researcher Petromatrix GmbH, said by e-mail. “Oil markets have so far discounted the Ukraine crisis, but this is starting to change the picture.”

Timchenko, a former Soviet Foreign Trade Ministry official who moved into oil trading, met Vladimir Putin in the 1990s, when Putin was in charge of foreign economic ties at the St. Petersburg Mayor’s office. When Putin seized Mikhail Khodorkovsky’s Yukos Oil Co. as retribution for political opposition, the government gave the contract to trade its crude to Gunvor.

Timchenko became a Finnish citizen in 1999, renewed his Russian citizenship in 2012 and has a fortune of $8.5 billion, according to Bloomberg’s Billionaire Index.

Timchenko also has stakes in OAO Novatek, Russia’s second-largest gas producer, and chemical maker OAO Sibur.

Hurt Business

The sanctions will “make their life difficult because people might not deal with them thinking that the financial transactions might be restricted,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “It may not kill them off but it’s going to hurt their business pretty significantly.”

Gunvor’s $500 million of notes due in May 2018 slumped, sending the yield soaring 3.41 percentage points to 10.91 percent, the highest since the securities were sold last May, according to data compiled by Bloomberg.

Gunvor was still trading oil products in Europe Thursday and sold a barge-load of diesel, according to four traders monitoring the Platts pricing window.

President Barack Obama Thursday said Russia’s incursion into Ukraine and continuing military movements carried “dangerous risks of escalation” and must be met by unified global opposition.

Prohibit Entry

Obama’s action against 20 individuals, including members of the Russian government and allies of Putin, adds to the list of seven top Russian officials and four people from Ukraine who previously were subjected to sanctions. Thursday’s sanctions imposed against Timchenko would prohibit his entry into the U.S. and freeze any assets he has there.

Dmitry Peskov, a spokesman for Putin, declined to comment on the U.S. Treasury allegations when contacted by telephone.

Timchenko and Tornqvist each hold 50 percent of Gunvor’s voting shares, according to a bond prospectus.

Gunvor bought two refineries in 2012 from insolvent refiner Petroplus Holdings AG: a 110,000-barrel-a-day plant in Ingolstadt, Germany, and a 107,500-barrel-a-day site in Antwerp, Belgium, according to the trader’s website. It also owns a 33 percent interest in the Signal Peak coal mine in Montana through its U.S. subsidiary Pinesdale LLC, according to its website.

Gunvor spokesman Seth Pietras said U.S. banks including Goldman Sachs Group Inc. conducted a thorough investigation on Gunvor’s ownership structure as part of the $500 million bond issued by the company last year.

“If you want due diligence on our ownership look to our bond prospectus which was co-led by an American bank,” Pietras said by telephone.

In addition to Goldman, other banks in the financing included Credit Suisse Group AG, ING Groep NV and Societe Generale SA.

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The U.S. said Russian President Vladimir Putin is an investor in a little-known Swiss oil company backed by a billionaire, a charge that along with new sanctions threatens to bring upheaval to global energy markets.
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Thursday, 20 Mar 2014 04:45 PM
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