Sale of major Rosneft stake to CNPC signals strengthening ties between China and Russia

China National Petroleum Corp. Deputy Chief Executive Wang Zhongcai said the company is interested in purchasing a stake in Rosneft, Russia’s state-owned oil company. The sale would strengthen the ties between the two countries, which have increasingly been working together on energy projects.

Russia needs the cash

Russia is looking to sell a 19.5% stake in Rosneft, the world’s largest listed crude producer, as it looks for ways to bridge its fiscal gap amid low oil prices. The Russian government has said the stake is worth $10 billion, reports The Wall Street Journal.

In January, Chinese investment firm China Insurance Investment Ltd. invested into Russia’s Yamal LNG project as part of a wider $6 billion energy and infrastructure fund as the two countries increase their cooperation on energy. China has long spoke about increasing its share in Russia’s oil and gas reserves, but deals have been slow to materialize.

“The process is more political than commercial,” said Chris Weafer, senior partner at Macro Advisory, a Moscow-based consultancy. “It’s an opportunity to expand relations.”

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Deteriorating relations with the West have prompted Russia to change its strategy to focus more on Asia. Last month, the Russian oil giant, Oil India, Indian Oil and Bharat Petroresources signed a Heads of Agreement for the possible acquisition of a 23.9% share in Vankorneft, a Rosneft subsidiary, by a group of Indian investors.

Rosneft also signed a MOU with ONCG Videsh Limited for cooperation in the Vankor project, envisaging the Indian company increasing its share in the project to 26%. The deal would bring the Indian company’s interest in Vankor to nearly 50%.

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