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EU sanctions start to hit Russian oil giant Rosneft

EU sanctions start to hit Russian oil giant Rosneft
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The sanctions squeeze is on at Russia’s biggest oil firm Rosneft.

With the EU poised to unleash more sanctions over Ukraine, previous measures mean Rosneft is cutting staff and production as its access to Western financing and technology has been severely curtailed.

That makes it more difficult to service $55 billion of debt and get the imported equipment needed to develop new fields and upgrade refineries.

Rosneft has had to ask for the equivalent of $40 billion in state help from a Russian sovereign wealth fund.

Prime Minister Dmitry Medvedev has said the company could get it, calling it reasonable, as the investment would be repaid from revenues from oil sales.

Talking about sanctions generally he said: “The government’s responsibility is to protect Russian businesses facing unfair and unlawful actions by foreign states or foreign companies”.

Rosneft, which alongside gas monopoly Gazprom is a top contributor to Russian government coffers, needs to invest heavily to bring new east Siberian fields online.

Last week it said it would cut staff to reduce costs: Kommersant business daily said Rosneft’s Moscow headquarters would see cuts of up to 25 percent from the current 4,000.

Rosneft’s output is four percent of global supply. But last week it reported a 1.3 percent production drop in August, as production in West Siberia regions declines.

President Vladimir Putin said last week Rosneft would welcome China buying a stake in the prized Siberian Vankor field. It was a major about-turn given the Kremlin’s long resistance to allowing its powerful neighbour access to such deposits.

“Rosneft’s decision to offer China a stake in the mega Vankor oil field in East Siberia signals that Moscow’s bargaining position has been further weakened by sanctions and that it needs the capital infusion,” said Emily Stromquist, analyst at Eurasia.