Exxon withdrawal and CEFC chief’s fall from grace double whammy for Rosneft

In what can without exaggeration be described as a bad day at the office, Rosneft was dealt two significant blows to its future plans for expansion in the space of 24 hours earlier this week when the US major Exxon Mobil firstly announced that it was abandoning plans to invest as much as $500bn in joint exploration ventures in the Russian Arctic. and then a major potential shareholder was detained by the Chinese authorities on possible corruption charges. The Exxon announcement was made during a regulatory filing late on Wednesday, and confirmed speculation that the company was bowing to pressure from the US and EU sanctions and would be formally walking away from the projects by the end of the year. 
The withdrawal ends a troubled agreement that was first proposed in 2012 with much fanfare, but was called into question after the US and EU imposed sanctions against Russia following Moscow’s invasion and annexation of Crimea. Rosneft did not immediately respond to a request for comment, but has previously said that it would push ahead with the projects next year were Exxon to pull out.
CEFC chairman Ye JianmingWithin hours of the news breaking, it transpired that the $9.1bn injection of capital Rosneft was expecting to receive from China’s CEFC after its acquisition of a 14% stake in the Russian enterprise from the Glencore-QIA consortium also looked set to go up in smoke as several of the country’s media outlets reported that its founder and chairman Ye Jianming had been detained for investigation into ‘suspected economic crimes’.
The acquisition was made public shortly after President Putin’s visit to Beijing last summer, and since then Ye’s fall from grace has been swift. In November, US federal prosecutors accused CEFC director and former Hong Kong home secretary Patrick Ho Chi-ping with bribing African leaders and rumours have been circulation for months that Ye has been using his connections to secure some exceptionally valuable concessions within China’s domestic energy industry, which is dominated by state-owned firms.
Rosneft share priceAlthough Rosneft shares remained 3% higher than when the deal was struck this morning, they have nevertheless fallen back 5% in the past three days on the back of news of Exxon’s withdrawal and the warning it may sound to other US and EU oil majors looking to do business with a company with such close ties to the Putin administration.

Source: FT