* Former co-president Chammah to advise on banking revamp
* Chammah, Moscow execs to form advisory group
By Melissa Akin
MOSCOW, Nov 12 Rosneft has hired
Morgan Stanley veterans led by former co-president Walid Chammah
to advise its president on an overhaul of its financial assets
and create a platform for hedging its oil trade.
Two top executives from Morgan Stanley's Moscow office, Rair
Simonyan and Elena Titova, have also been hired to advise Igor
Sechin, who has launched a series of international exploration
deals and a $55 billion buyout of BP's Russian joint
venture, TNK-BP, Russia's largest ever takeover.
Rosneft's move underlines a shift in power in commodities
trade away from Morgan Stanley and rival financial institutions
such as Goldman Sachs and J.P. Morgan, which have been forced
into retreat by increasingly strict market regulation.
"Clearly tighter regulation is an opportunity for a new
entrant into the trading business," Chammah told Reuters.
"That will open up opportunities for third parties, either
for financial investors in the form of hedge funds, or
independent oil traders like Glencore and others, or
new entrants like ourselves who are oil companies who would like
to take part in the market by having the ability to physically
deliver the supply and actively participate in the derivatives
side of it."
For Rosneft, it is a chance to grab seasoned staff and raise
Rosneft's game on international financial markets in preparation
for a push into new oil provinces, where hundreds of billions in
dollars of investment are needed.
Sechin is a longtime ally of President Vladimir Putin who
advanced his goal of launching Rosneft into the ranks of global
majors by signing up ExxonMobil, Statoil and
Eni to explore in Russia's Arctic seas.
"The opportunity costs could be very high, whether as a
result of incompetence or of abuse," Simonyan said. "When they
start to execute 20 year deals worth $300-$500 billion, the
figures defy comprehension. The potential for theft is almost as
much as the gross product of the Russian Federation."
"There must be absolute certainty that the company is
getting the best terms possible. It needs people who can be
trusted on one hand but are capable of making these judgments on
the other. Walid's role is especially great here, since he knows
the people and the structures, what can and can't be done."
Morgan Stanley has been close to Rosneft since it managed
a$10 billion initial public offering in 2006, supplying the
company with its last three finance chiefs. Simonyan, an
academic by training, is a former Rosneft executive.
Titova will become president of a Rosneft-owned bank, the
mid-sized Russian Regional Development Bank, which had assets of
88.5 billion roubles ($2.8 billion) as of Oct 1. Chammah and
Simonyan will join its board.
Chammah served as co-president of Morgan Stanley from 2007
to 2011. A fixed income specialist, he oversaw Morgan Stanley's
commodities trading business, which during peak years brought in
upwards of $3 billion.
International banks, which piled into trading oil, metal and
agricultural commodities both as physical volumes and paper,
have been forced into a retreat by the 2008 financial crisis and
tightening U.S. regulation.
Morgan Stanley itself may sell off part of its commodities
trade business to its management or a Qatari investment fund to
reduce the impact of new restrictions on derivatives trade by
Rosneft, Russia's largest producer and by its own
reckoning, its largest taxpayer, exports hundreds of millions of
barrels of crude per year without hedging, leaving the company
and the Russian budget vulnerable to swings in the oil price.
"It is a broader problem for Rosneft. Risk management can be
implemented in different ways," Simonyan said. "What it allows
is predictability of cash flows and a chance to plan operations