Surgutneftegaz wants to escape to the euro area

The most closed Russian oil company asks its customers to pay for oil in euros. Thus, it is preparing for future US sanctions.
20.09.2018
RBC
Origin source
The Russian company "Surgutneftegas" asks its contractors to give their consent to settle the contracts in euros instead of dollars, if necessary. This is reported by Reuters referring to traders who work with Surgutneftegaz.

"We do not comment on our commercial activities," the agency told the Russian company. As noted by Reuters, unlike other Russian oil companies that enter into long-term contracts for the supply of raw materials, Surgutneftegaz ships 2 million tons of oil a month, concluding monthly contracts on the spot market. Therefore, in case of imposing sanctions, the company will have 30 days to find alternative ways of settling with customers.

Six traders who regularly work with Surgutneftegaz, told Reuters that the company is asking its counterparties to sign an appendix to the contract, in which they confirm their consent to possible settlements in euros. "Surgutneftegaz" thus tries "to avoid any possible problems with payment in dollars," Reuters quotes a company message sent to one of the counterparties.

Three traders who told the agency about this, started negotiations with their partners in the summer about the possible settlement in the European currency. But now the Russian oil company has tackled this issue with more urgency. In some cases, Surgutneftegaz even warned that it will not accept offers to buy oil until buyers agree to sign the application.

In letters to counterparties Surgutneftegaz did not mention the risk of imposing sanctions, but two traders told Reuters that, based on interactions with the company, it is obvious that this is exactly what this is about. "Surgut is afraid of sanctions," a source in a large European oil company told the agency.

It is not known how widespread such preparation is for possible sanctions among Russian companies, Reuters reports. So, the source of the agency in Gazpromneft said that most of the company's contracts already contain a calculation option not in dollars. Another source in the company said that Gazpromneft intends to include such an option in all contracts that will be concluded in 2019.

A few more oil companies also have provisions on the possibility of payments not in dollars under certain circumstances, the agency said four sources in the industry.

There are no indications that Surgutneftegaz can get under the next round of tougher American sanctions. Restrictions against the company were introduced by Washington in 2014. The head of the company Vladimir Bogdanov has been on the US Ministry of Finance's sanction list since April this year. In the same list is the billionaire Oleg Deripaska and UC Rusal, which, due to sanctions, faced problems in concluding new contracts. Companies included in the list are actually restricted access to the American financial system.

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