Morgan Stanley To Sell Global Oil Trading Business To Russia’s State-Run Oil Giant Rosneft

on December 21 2013 1:59 PM
Morgan Stanley
The corporate logo of financial firm Morgan Stanley is pictured on a building in San Diego, California September 24, 2013. Reuters

Morgan Stanley (NYSE:MS) announced on Friday the sale of a majority of its global physical oil trading operations to Russia’s state-run oil giant Rosneft Group (LON:ROSN). The transaction marks the entry of the Russian company, headed by Igor Sechin, a close associate of Russian President Vladimir Putin, into the U.S. market.

Financial terms of the transaction were not disclosed, but it involves more than $1 billion worth of oil, according to Reuters. The sale has stirred concerns in Washington, with Sen. Edward Markey (D-Mass.), a member of the Senate Committee on Foreign Relations, urging lawmakers to “closely review” the deal for potential harm to U.S. markets, Reuters reported.

“I think it’s a confirmation of a trend that Wall Street is exiting the (commodities) business,” Craig Pirrong, a finance professor at the University of Houston and an expert on commodity markets, told Reuters.

Morgan Stanley said the sale includes an international network of oil terminal storage agreements, inventory, oil purchase, sale and supply agreements, equity investments, and freight shipping contracts.

About 100 traders in the U.S., the UK and Singapore, representing a third of Morgan Stanley’s total commodities executives, will move to Rosneft as part of the transaction, as well as Morgan Stanley’s 49 percent minority stake in tanker company Heidmar Holdings.

“The transaction is not expected to have a material impact on Morgan Stanley’s financial results,” the company said in a statement.

The sale is subject to regulatory approval in the U.S., the European Union and certain other jurisdictions, and is expected to close in the second half of 2014, the statement said.

The Committee on Foreign Investment in the United States, an executive panel that examines foreign investment for potential threats to national security, is expected to review the sale, Reuters reported.

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