Russian Oil Giant Hoards $ 44 Billion Cash in Sanctions' Shadow

By

Elena Mazneva

  • Surgutneftegas may be stuck with money if kerbs are imposed
  • Rising concerns U.S. may hit company after sanctioning CEO

Surgutneftegas OJSC, Russia's fourth-largest oil producer, is consolidating its position as the country's richest company by amassing $44 billion in money and bank deposits even as dangers of further U.S. sanctions mount.

The Siberian driller increased its cash piling 6 percent in dollar words last year, according to a statement Saturday. Surgutneftegas didn't include a breakdown by currency in its 2017 report to international standards. For at least the past six years, it has held most of the cash the U.S. greenback.

Investors are watching Surgut's accounts closely after the U.S. Treasury earlier this month included Chief Executive Officer Vladimir Bogdanov in a sanctions list. That has raised concern in Russia that Surgut could also come under sanctions. The penalties could entail the company is left stranded with dollars it can't easily use as banks, contractors and clients likely to steer clear.

Greenback Fans

Surgutneftegas prefers to maintain the majority of its huge money hoard in U.S. dollars

SOURCES: Surgutneftegas, Bloomberg

NOTE: Figures prove money and money equivalents, banking deposits. Surgutneftegas didn& apos; t offer breakdown for FY2017

Similar penalties against Russian billionaire Oleg Deripaska and his United Co. Rusal have already caused marketplace convulsions as the company's contractors and banks have frozen copes with the aluminum giant.

Should Surgut faces sanctions similar to Rusal, the company could have problems employing the dollars as all such transactions are monitored by the U.S ., said Alexei Panich, a partner at an international law firm Herbert Smith Freehills. Russian banks may continue to hold dollar deposits under existing contracts but Surgut may face difficulties in extending tenures and putting more cash in.

The lion's share of the company's cash is in long-term deposits in state-run Sberbank PJSC, according to a person close to the oil company. The bank held 44 percent of Surgut's deposits in 2012, the last time it disclosed the information. Most of the remainder was with VTB PJSC, Gazprombank JSC and the local unit of Italy's UniCredit SpA.

Surgutneftegas, Sberbank and UniCredit declined to comment. Others didn't respond.

Surgut was included in U.S. sanctions imposed in 2014 over Russia's role in the deadly Ukraine conflict. Those kerbs targeted some technology render and access to foreign capital marketplaces, which aren't vital for the company and haven't affected its operations.