MOSCOW (MRC) -- Russia's intervention in Ukraine signals trouble for OAO Rosneft's bid to buy Morgan Stanley's oil-trading unit, according to people involved in the deal and others familiar with the U.S. government's approval process, said The Wall Street Journal.
The proposed acquisition by Russia's biggest oil producer, which is state-controlled, needs U.S. government approval by the Committee on Foreign Investment. CFIUS, a secretive government body, weighs national security risks and can sink deals.
Rosneft is paying several hundred million dollars for the business, the person familiar with the deal said, adding the companies are still months from seeking official U.S. government approval.
A Rosneft spokesman said the companies "are working together according to an agreed schedule." Morgan Stanley said it wasn't deterred. "We intend to submit the transaction for all necessary regulatory approvals, and are targeting a close in the second half of 2014," a Morgan Stanley spokeswoman said.
The U.S. already has severed trade talks with Russia and threatened sanctions and other responses to Moscow's military intervention in Crimea. Rosneft is controlled by the government of Russian President Vladimir Putin, and the deal is liable to face opposition from within the U.S. Congress.
With the full takeover of what was formerly a joint venture with the U.K.'s BP PLC, Rosneft is the undisputed leader of the Russian oil industry, which is about the size of Saudi Arabia's. The Russian government owns a majority of Rosneft's shares and exerts significant control, with private investors holding minority stakes traded on stock exchanges. Exxon Mobil Corp. has a major Arctic joint venture with Rosneft, and BP is a big shareholder, complicating the international politics.
Rosneft and Morgan Stanley have been aligned on flashpoint deals before. In 2006, Rosneft won approval to go public on Moscow and London stock exchanges, despite criticism in the West that it had unfairly acquired the oil assets of Yukos. Rosneft has said it never violated Russian or British law. Morgan Stanley was in the group that coordinated the initial public offering, which raised USD10.4 billion.
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