Syrian War on Notice as Trump’s Win Allowed Qatar and Russia to Reach $10.0-Billion Deal
The Russian Federation, which directly owns 50% of Rosneft, has sold 19.5% to Glencore PLC. (LON:GLEN) and Qatar. The exact distribution of capital is unknown. Russian President Vladimir Putin and Rosneft CEO Igor Sechin announced the deal on state television on December 7.
This is a big deal. Yes, Rosneft is the world’s largest oil company. And yes, Glencore is probably the largest commodities producing and marketing company in the world. However, the more interesting partner in the transaction is Qatar.
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For Qatar to acquire such a large chunk of Rosneft, there is much more at stake than just another dull business deal. The Russian government is Rosneft’s main shareholder. The company’s headquarters is on Balchug Island, just a stone’s throw away from the Kremlin.
Russia did not have to sell the shares to China or India, as some imagined. The sanctions that the European Union (EU) and the United States have inflicted on Russia for the annexation of Crimea—and the alleged military support to the Donbass separatists—should have blocked Rosneft from taking on new board members. But they did not.
The decision comes as President-elect Donald Trump could lift sanctions against Moscow or significantly reduce their impact. The deal also comes in the backdrop of the Organization of the Petroleum Exporting Countries’ (OPEC) agreement to reduce petroleum production, allowing for crude prices to rise.
The Russian leadership proclaimed the Rosneft-Qatar-Glencore agreement to be the “the largest” global energy sector deal of 2016. Russia—which is not a member of OPEC—has promised to take part in gradually decreasing its extraction of 300,000 barrels per day. It’s unclear whether Russia’s agreement to cut was a condition for the deal.
Qatar-Rosneft Deal Is an Early Christmas Present for Moscow
The Kremlin can deliver the choked state accounts some much-needed oxygen after two-and-a-half years of low oil prices and sanctions. Rosneft’s market cap is about $57.0 billion (€55.0 billion). Glencore and Qatar bought the shares at a discount of two percent, or $11.0 billion (€10.5 billion). But Qatar is greater, because the Gulf State is already a majority shareholder in Glencore.
The $11.0 billion of proceeds will go to the state-owned Rosneftegaz, which is expected to pay part of it to the state. They would then be used to cover the deficit caused by European economic sanctions. Let’s repeat that: Qatar has just given Russia a much-needed injection of proceeds to help the government confront Western sanctions.
Why is that so important? Because Russia and Qatar appear to have separated their economic and foreign policies. The Rosneft transaction, packed with government-to-government interests, implies that Russia has sealed an alliance with the very same Qatar it has fought against (by proxy) in Syria.
Syrian Opposition Agrees to Unconditional Talks for the First Time
Could it be a coincidence that during the past weekend, 10 Western and Arab countries that support the Syrian opposition—including the United States and Qatar—met in Paris? The representative of the Syrian opposition, Riad Farid Hijab, and the president of the local council of East Aleppo, Brita Hagi Hassan—representing the “rebel” forces—were also in attendance.
U.S. Secretary of State John Kerry underlined the need for negotiations. Meanwhile, France’s foreign minister, Jean-Marc Ayrault, said the Syrian opposition is, “ready to resume” negotiations with the Syrian regime without conditions. (Source: “Syrian opposition ready to resume talks without preconditions – Ayrault,” ITAR-TASS News Agency, December 10, 2016.)
The participants, led by U.S. Secretary of State, delivered the usual words against the “genocide taking place.” But such accusations of war crimes were largely for media consumption. They had nothing to do with solving the Syrian crisis. The main and new political point was the announcement about the Syrian opposition’s willingness to negotiate directly.
There was no statement from the belligerent countries, including Qatar. This highlighted the fact that neither they, nor their proxy anti-Asad warriors, have any results to show for their efforts.
There may or may not be any link between the Qatar-Rosneft deal and the opposition’s sudden turn. Both factors play into the Kremlin’s hands. The signal is that a political solution to the Syrian war is approaching and that the Russian-backed Asad government would have the upper hand.
The unexpected Rosneft deal clearly reflects the changed international context. Donald Trump’s imminent tenure at the White House might improve relations between Moscow and Washington. The result is that those wanting to invest in Russia should face fewer risks.
Expect a reduction, if not outright cancellation, of the sanctions against Moscow. The signal is that Russia will have maintained its historic influence in Syria. Meanwhile, the Syrian opposition will likely have to confront the Russian, Iranian, Iraqi, and Lebanese-backed forces with significantly less foreign backing.
