Russian Finance Minister Anton Siluanov has announced that some of Russia's $85.3B National Welfare Fund, which is meant for infrastructure investments, could be given to major companies that now face constrained access to Western resources and capital.
Rosneft (OTC:RNFTF) and Novatek (OTC:NOVKY) will be first in line for the financial aid, added Siluanov. Rosneft previously stated last month that it needed 1.5T rubles ($39.7B) in aid from the government to withstand Western sanctions.
The sanctions are already taking a heavy toll on Russia's economy, with the Bank of Russia revising its economic forecasts last week, stating that if a drop in oil prices accompany the geopolitical tensions, the country's economy could likely stagnate in the next three years.
Russia's ambassador has declared that the July 16 U.S. sanctions imposed on Rosneft (OTC:RNFTF), Novatek (OTC:NOVKY) and Gazprombank (OTCPK:OGZPY) violate World Trade Organization rules and may force Moscow into a destabilizing trade dispute.
The accusation comes after the U.S. condemned Russia for firing artillery across the border into Ukraine.
A European sanctions proposal against Russia is still being drafted following yesterday's EU summit.
The Obama administration says it is widening sanctions against Russia, restricting access to American debt market for some Russian banks, energy companies and defense firms.
Among the firms targeted are top oil producer Rosneft (OTC:RNFTF), the financial arm of natural gas producer Gazprom (OTCPK:OGZPY), and gas producer Novatek (OTC:NOVKY).
It is unclear how the moves may affect U.S. companies with multibillion-dollar businesses in Russia such as Exxon Mobil (NYSE:XOM), which expects to begin drilling an Arctic well with Rosneft this month that will cost as much as $700M and is planning a $300M shale well project in Siberia.
Russia and China reach agreement on two huge oil and gas supply deals: Rosneft (RNFTF), the world's largest listed crude oil producer, will supply Sinopec (SNP), China's largest oil refiner, with 10M metric tons/year of oil for 10 years; and Novatek (NOVKY), Russia's largest independent natural gas producer, will deliver 3M tons/year of liquefied natural gas from its Yamal LNG project to China National Petroleum (PTR) for 15 years.
Russia is looking increasingly to Asia for customers and funding to help develop its vast energy reserves, with demand in China and elsewhere in Asia soaring while it shrinks in other industrialized countries.
Gazprom (OGZPY.PK) and Novatek (NOVKY.OB) reportedly want to buy Eni's (E) 29.4% stake in Russian gas company SeverEnergia, which would help the Russian duo counter the influence of Rosneft (RNFTF.PK), which last month agreed to purchase Enel's indirect stake in SeverEnergia for $1.8B.
The contest in Russia for gas resources and markets comes to a head as the government reviews a proposal for a partial lifting of Gazprom's export monopoly for tanker-shipped liquefied natural gas from the start of next year.
SeverEnergia owns licenses for nine gas fields in Russia, with proven and probable reserves of 7.3B boe.
The agreement allows Novatek, Russia's no. 2 gas producer, to strengthen its position in the country's domestic gas market, where it has been increasing market share at the expense of Gazprom (OGZPY.PK) and other companies.
Last year, Novatek accounted for 35% of E.ON Russia's gas purchases of 13.5B cu. meters.