Rosneft CEO: Russian Business Can Turn Elsewhere if Sanctions are Passed

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Researched by Industrial Info Resources (Sugar Land, Texas)--The chief executive of Russia's state-controlled energy company OAO Rosneft (OP:OJSCY) (Moscow) warned Western nations that Russian businesses could turn elsewhere if Western sanctions related to the Ukrainian crisis are passed. According to a Prime News agency report, Igor Sechin said that current market conditions make it a good time to purchase additional shares.

Sechin, a former deputy prime minister of Russia and a close ally of President Vladimir Putin, begins a trip to Asia this week as Russia seeks closer ties with the East amid a growing rift with the West over Russia's involvement in Ukraine. Crimea held a referendum on Sunday, in which it said 97% of voters had backed joining Russia. Crimea's leaders declared independence on Monday, and Russia acknowledged it as a nation.

Sanctions and Effects on Economy
Analysts are trying to assess the effects of sanctions against Russia's oil and gas sector. A research paper by Renaissance Capital analysts Ildar Davletshin and Artem Kvas said the possibility of sanctions against Russian oil and gas companies was low.

"This is in stark contrast with the previous crisis, which was accompanied by a 70% collapse in the oil price, and with most stocks trading at record highs going into that crisis. Strong oil and a weak ruble is a supportive macro environment," the analysts wrote. "The only risks we see for the sector relate to the possibility of a higher fiscal take if the Russian budget weakens as a result of economic recession and/or large-scale financial aid to Crimea."

However, Russian economist Sergei Guriev said in his column with the Project Syndicate: "Though the scope of the sanctions remains uncertain, the effect could be enormous. Russian and foreign businesses have always been worried about the unpredictability of the country's political leadership. Lack of confidence in Russian policymaking is the main reason for capital flight, low domestic asset prices, declining investment, and an economic slowdown that the Crimean crisis will almost certainly [worsen]."

Russia's annual exports--mostly oil, gas, and other commodities--are worth nearly $600 billion, with annual imports totaling almost $500 billion, Guriev said.

The officials blacklisted by the U.S. and the European Union for allegedly destabilizing Crimea and prompting Russia's annexation of the region have shrugged off initial sanctions, saying they have no assets in these countries and wouldn't be affected.

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