(MENAFN- The Peninsula) Rosneft, Russia's biggest crude oil producer, may back out of a deal to buy Morgan Stanley 's oil trading unit because Western sanctions make it virtually impossible to finance day-to-day operations, three sources close to the state-controlled company said.
The people said the chances of the deal going through range from "possible" to "highly unlikely." A spokesman for Rosneft said that "the work over the deal is still ongoing."
The business in question trades actual barrels of oil instead of just contracts linked to the price of crude. Morgan Stanley is under US pressure to sell the unit because regulators regard physical oil trading as too risky for a major bank to own because unpredictable events like oil tanker leaks could expose it to billions of dollars in liability.
A spokesman for Morgan Stanley declined to comment. Ruth Porat, the bank's chief financial officer, said in July she expected the deal to close later this year. Rosneft declined official comment.
Rosneft agreed to buy the unit in December. Since then, the United States and the European Union have imposed wide-ranging sanctions on Russia's energy and military sectors to punish Moscow for its incursion into Ukraine.
Rosneft's chief Igor Sechin, a close ally of Russian President Vladimir Putin, has been on the US sanctions list since April. Rosneft itself was added to the list in July.
Rosneft has enough cash to buy the Morgan Stanley unit, which sources said carries a price tag of between $300m to $400m. But to operate day-to-day, the business requires billions of dollars of bank lines of credit, funding that is difficult to secure given the sanctions.
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