Rosneft’s purchase of US Morgan Stanley oil trading requires the approval of the Committee on Foreign Investment in the United States (CFIUS)

In December 2013, Morgan Stanley agreed to sell its oil trading group to Rosneft. Despite the sanctions on Russia, the European Commission approved the deal on 4 September 2014 because it would not harm competition in the European market. The Federal Trade Commission (FTC) in the United States already had approved the sale on 17 June, but it now goes to the Committee on Foreign Investment in the United States (CFIUS), an intergovernmental body that includes members from the Commerce, Defense, Homeland Security, State, and Treasury departments.

The deal allows Rosneft to acquire the crude oil storage facilities and transport system and related interests from Stanley Morgan for an undisclosed amount that likely is worth several hundred million US dollars. Morgan Stanley will no longer be in the business of selling oil, but it still will broker deals between clients and oil markets. It will cost approximately 100 people their jobs at Morgan Stanley. As a result of the sale, Rosneft, already one of the word’s largest energy companies, would join the ranks of leading oil-trading companies, which includes the Vitol Group, Glencore International, and Koch Industries.

Although both companies want to proceed with the sale, there is a possibility that CFIUS will not approve it because of the sanctions against Russia. The US government specifically prohibits transactions with both Rosneft and its chairman, Igor Sechin.

In an article on 5 September 2014 in Vedomosti, Yaroslav Kulick, a partner and head of the competition practice of ART DE LEX law firm, stated that “the CFIUS decision will depend on personal beliefs, based on the results on the investigation. CFIUS will consider the application of Rosneft differently now than when the deal was announced in December 2013 because of the possibility that Rosneft may strengthen its competitive advantage in the global market for trade in oil. We should expect a very careful study of the possible consequences.”

According to Mr. Kulick, the US president has the right to veto the deal, but statistics show that such decisions have been extremely rare. During the 2008-2012 period, the president vetoed only one transaction out of 538.