Kiev’s attacks on Russian oil companies purely ‘political’
“Ukraine’s actions can be totally interpreted as an implementation of somebody’s political order. Treatment of Russian companies in Ukraine has significantly changed after a political coup took place there,” Valery Nesterov, oil and gas analyst at Sberbank-CIB, told RT.
Lukoil, Rosneft, Transneft, and Tatneft all face political pressure from Kiev, which Moscow says it will counter with financial support, if needed.
“The government will provide the necessary support for Russian energy companies in Ukraine, where they face problems,” Russian Foreign Minister Sergey Lavrov said on Wednesday.
On January 16, Ukraine’s secret service, the SBU, opened a criminal case against Lukoil, Russia’s second biggest oil company, accusing it of financing terrorists in the eastern region of Donbass. The SBU claimed $2 billion in funds were being sent via Lukoil and VETEK between 2013 and 2014 to the breakaway regions in Donetsk and Lugansk. Russia has denied the allegations.
“The accusations against Russian companies, namely the latest legal action against Lukoil look politically motivated,” Sergey Pigarev, a financial analyst from Rye, Man & Gor, wrote RT in an e-mail.
“Lukoil is one of the world’s leading oil and gas companies with an ideal reputation, perfect management and business all around the world; this is why we can hardly imagine that Lukoil could be meddled in financing terrorism. This accusation looks very strange,” Pigarev added.
The company’s operations in other countries shouldn’t suffer, as “a pragmatic business community takes the situation in Ukraine as a unique case,” Pigarev said.
The conflict that is draining the Ukrainian economy may actually push out some of the country’s biggest investors - the Russians. Instead, Kiev will look for more friendly Western backers.
“Ukraine, in fact, doesn’t let Russian companies operate in their country, and are doing everything to replace Russian companies with Western ones,” Nesterov said.
“This is a short-sighted policy, because Ukraine would barely be able to fill the gap that will occur after they cut business ties with traditional Russian trade partners.”
At present, Ukraine sources 36 percent of its natural gas from Russia, but its discussing more cooperation with Europe, and possibly the US.
“Energy supplies from the west would be much more expensive for Ukraine than those from Russia,” the Sberbank - CIB analyst concluded.
Nesterov said the political tension forced Lukoil to pull a $140 billion investment into its Ukrainian portfolio it planned for 2014-2019.
In August 2014, Lukoil sold off 240 gas stations in Ukraine to Austria’s AMIC Energy Management GmbH (AMIC).
In June, Lukoil was the victim of attacks carried out by ultra-right nationalists, who seized 3 gas stations in the Western Ukrainian province of Ivano-Frankova, demanding free petrol for the Ukrainian Army.
CEO Igor Sechin said his company plans to “defend assets” in Ukraine, which includes 41 gas stations as well as refineries and storage facilities.
“Earlier Rosneft planned on expansion in Ukraine,” Nesterov said, but like Lukoil, the blowback from the Ukrainian government may not make it worth it.
In mid-October, an oil storage facility was seized by armed men who began to export the stolen oil products, which Nesterov estimates to total of $13 billion.
Rosneft owns the Lisichanskiy refinery, which is in the heart of war-torn eastern Ukraine in Lugansk. The refinery, which has a capacity to process 8 million tons of crude annually, was severely damaged in July, when it came under heavy shelling from the Ukrainian army. Rosneft is seeking $140 million in compensation for the damage, and Ukraine is reportedly trying to bring the plant under state control, TASS reported.
Tatneft, a mid-size oil producer and transporter, also faces mounting pressure from Kiev. It jointly owns the country’s largest refinery Kremenchug, also called Ukrtatnafta after the co-owner, Naftogaz. Tatneft has controlled 30 percent of the plant since the early 1990s, but may now be looking to exit the volatile market.
In August of 2014, Tatneft was awarded $112 million in compensation from the Ukrainian state in a dispute over the ownership of Kremenchug.
“Tatneft will consider the opportunity to sell its oil refineries in Ukraine,” Nesterov said.
This past April, Transneft, Russia’s biggest oil pipeline operator, threatened to cut off the oil it was supplying to Ukraine, after it said $63 million worth of oil products was siphoned off from its PrikarpatZapadTrans pipeline.
In December, a Ukrainian court ruled that its subsidiary Transnefteproduct stole 140,000 tons of diesel fuel from its pipeline, which was allegedly siphoned off to Hungary.
"It is simpler for us to close this pipeline, forget about it, since it was built in the 1970s," Transneft President Nikolai Tokarev said in December.
In 2011, a Ukrainian court ruled that some of the diesel fuel in the pipeline, owned by Transneft subsidiary PrikarpatZapadTrans, legally belonged to the Ukrainian state.