On December 5, 2016, a few days before the announcement of the privatization of Rosneft in favor of the consortium of Glencore and Qatar's sovereign fund, the British entities of Glencore established in England three companies in the form of limited liability partnership (LLP): QHG Holding, QHG Investment and QHG Trading. At the end of December in all three companies a new partner was registered: Qatar Holding, a subsidiary of QIA.

LLP is a type of corporate structure in the UK, which is responsible for its obligations, but the responsibility of the partners is limited to the size of their deposits (in the traditional partnership participants fully liable for the debts of the company). In a press release on December 10 (.pdf), Glencore reported that the transaction to purchase 19.5% of Rosneft provided for a "structure with limited liability", in which the financial risk is limited to the contribution of Glencore's own funds in the amount of €300 million. QIA's contribution amounts to €2.5 billion, while the remaining €7.4 billion for the purchase of shares in Rosneft was attributed to bank financing, reported Glencore.

One of these three companies, QHG Trading, was mentioned by Rosneft in its message on December 7 related to the agenda of the board meeting, which was finally approved an agreement on strategic cooperation with the QIA and Glencore. The agenda of the meeting listed a question on transactions for the supply of petroleum and petroleum products with QHG Trading LLP.

Among QHG Holding partners are Glencore Energy UK, Qatar Holding, and also offshore company QHG Cayman registered in December in the Cayman Islands, which role in the transaction is not clear.

Qatar Holding and the aforementioned QHG Holding are partners in QHG Investment. Finally, QHG Trading have Glencore Energy UK and Qatar Holding as partners. Glencore and Qatar hold equal shares (50/50) in a consortium on strategic partnership with Rosneft, as reported earlier by Glencore and Rosneft.

Press service of Glencore and QIA representatives did not respond to requests to RBC.

Why three structures?

Portfolio Manager of GL Asset Management, Sergey Vakhrameev, believes that the consortium members would create the British and offshore structures for tax optimization in case the contract for the purchase of securities of Rosneft would have the possibility of redemption of that share by Rosneft itself and its shareholder, Rosneftegas, in the longer term. When reselling the share in favor of the shareholder, such LLP entity is exempt from having to pay capital gains tax, the expert explains. In addition, he believes that other transactions in the consortium, such as trading operations with oil, also may be conducted through the British company.

QHG Holding could theoretically get into the possession of the package of 19.5% of shares of Rosneft, while QHG Trading is the company to trade oil, and QHG Investment is the company which will be engaged in joint projects by making investments, says Vakhrameev. Rosneft in its release dated December 10 reported that a strategic cooperation agreement with Glencore and QIA provides for the development of projects for production, logistics and trading business. The head of Rosneft, Igor Sechin, on December 7 reported to President Vladimir Putin that the transaction involved the creation of a special mining enterprise together with a consortium, both in Russia and abroad.

Head of antitrust law firm Sameta, Andrey Astanin, says that the international practice to create the so-called empty companies on standards of British law a globally accepted habit; is possible to split a consortium-purchased package of shares of Rosneft and spending funds between them. The lawyer believes that the establishment of such legal entities could be a requirement of one of the partners in the transaction, possibly Qatar Foundation. In addition, the parties of the transaction may have agreed to resolve their disputes in a British court of arbitration, which explains the jurisdiction of the United Kingdom to create such structures.