16 Apr 2024 21:01

Russian oil and gas sector survives shock of last two years, finds new operating instruments, but realignment must continue - expert

MOSCOW. April 16 (Interfax) - Over the past two years, the Russian oil and gas industry has developed new tools in the changed operating environment, but the process should be continued to achieve stability, says Marina Belyakova, Partner and Head of Tax Services for Fuel and Energy Clients at B1 Group.

After the start of the Russian military operation in Ukraine, all operations with Switzerland, where the trading structures of Russian oil and gas companies were located, were blocked, which essentially paralyzed the sales function, so the trend was set to move to Arab countries, she recalled at the National Oil and Gas Forum.

"Of the evils that were offered, we chose the least. Because almost no one had any history of trading operations through the Arab Emirates, but nevertheless it is easier and clearer than trading through completely unknown jurisdictions," Belyakova said.

"The Emirates are an interesting jurisdiction. If you look at it now, they are quite well developed. But you have to realize that the country is under pressure from the States, and therefore, when creating this hub, companies have to think through plans B, C and D, creating empty companies in some jurisdictions like Qatar, Bahrain, Hong Kong for the time being. But this is a move into countries that are not quite clear to us. Because these are developments that are built up over years and sometimes decades," she said.

"So, you come to some free zones of the Emirates and realize that there is a completely different legal system there. It is sometimes impossible to issue loans there, you do not understand how to formulate normal trade contracts, and in terms of payments there is also a problem," the expert continued.

She cited ownership structure as another problem facing the industry, as investment in Russian oil and gas was made through joint ventures, among other arrangements. "These joint ventures were created mainly through a few countries that have become unfriendly - these are Holland and Cyprus. While Switzerland is still somehow showing signs of life, and Cyprus as well, Holland basically paralyzed operations for Russian companies," Belyakova said. "This was the second challenge companies faced. How to get assets out of these countries? Because you can develop something for a long time, and then lose all these assets in one fell swoop, based on the political situation that has developed," she said. In this regard, the state has provided various mechanisms, how to transfer these corporate settings, with the so so-called mechanism of redomiciliation used in this regard: that is, when a Cypriot or Dutch company becomes Russian, the B1 Group executive said.

"There is a similar situation with companies that own tankers, because many are our partners and are willing to work with us, but we need to rebuild the ownership structure of the whole of transportation logistics," she said.

"To summarize, we have overcome the shock. Tools for most, at least transitional problems, business has found and developed these. But I cannot say that a new point of balance has been found. First - because no one can now say how stable our new infrastructure solutions are, because they are constantly between the two fires of the economic interest in working with us and political pressure from unfriendly states," the expert said.