* Rosneft is subject to Western sanctions
* Deal structured to mitigate sanctions risk
* Rosneft joined in deal by UCP, Trafigura
* Partners have close Rosneft ties
By Katya Golubkova
MOSCOW, Oct 18 Russian private investment group
United Capital Partners (UCP), which is teaming up with oil
giant Rosneft to buy India's Essar Oil in a $12.9 billion deal,
said it may sell its stake within five years.
The purchase of Essar Oil, by Russia's state-owned Rosneft
and a consortium of UCP and global oil trader Trafigura, will be
the biggest foreign acquisition ever in India and Russia's
largest overseas deal. The takeover, agreed on Saturday, is
expected to be completed in the next few months.
The chief executive of Russian lender VTB, which advised on
the deal, has said it was specially structured to ensure it was
not affected by Western sanctions imposed on Rosneft and its
boss Igor Sechin, an ally of Russian leader Vladimir Putin.
Since Rosneft will control only 49 percent of Essar under
the deal, with Trafigura and UCP jointly holding another 49
percent, the sanctions risk is mitigated.
But the structure has raised questions about whether UCP and
Trafigura will cede their shares to Rosneft once sanctions are
lifted or eased, giving Sechin full control over the
The sanctions were imposed over Moscow's annexation of
Crimea and support for separatist rebels in eastern Ukraine.
"We do not plan to sell our stake to anyone in the near
future," Irina Lanina, a director of UCP, said in a written
response to Reuters' questions.
"We plan to make this investment in a consortium with our
partner Trafigura and are likely to exit together with them as
well. As of now, we are looking at (remaining in Essar) for 3-5
years but time will tell," Lanina said.
Lanina said that UCP plans to use its own funds and credit
facilities to finance the acquisition of its stake but did not
say how much it would cost.
Rosneft has close and long-standing ties with its other
partners in the Essar deal.
UCP's President Ilya Shcherbovich was a Rosneft board member
in 2012 and 2013. Shcherbovich has said that UCP has acted as a
consultant to Rosneft on investments, though without disclosing
concrete deals or projects.
UCP is also a minority shareholder in Russian oil pipeline
monopoly Transneft, and took the company to an
arbitration court earlier this year over what it said was an
insufficient dividend payout.
Transneft and Rosneft have had bumpy relations over several
issues, including usage of pipelines and tariffs the monopoly
charges oil producers for shipments. UCP has denied it brought
the court case on Rosneft's behalf.
Rosneft also has a long association with Trafigura, which is
its biggest long-term buyer of Urals crude oil.
The Indian company's assets include a 400,000 barrels per
day (bpd) refinery, import and export facilities, and gas
Under the agreement, the 49 percent stake held by UCP and
Trafigura is equally split between the two. The billionaire Ruia
brothers own the remaining 2 percent stake.
The acquisition gives Rosneft a gateway into the world's
fastest growing fuel market at a time when Sechin has predicted
competition for global energy market share will intensify,
especially with Saudi Arabia.
(Additional reporting by Oksana Kobzeva in MOSCOW and Nidhi
Verma in NEW DELHI; Writing by Vladimir Soldatkin; Editing by
Christian Lowe and Susan Fenton)