Morgan Stanley has sold the majority of its global physical oil trading operations to Russian state-run oil major Rosneft, becoming the latest Wall Street firm to dispose of a major part of its commodity business.
The deal represents a bold move into the US market by Russia’s top oil producer, which is headed by Igor Sechin, a powerful ally of Russian President Vladimir Putin. The Russian state owns almost 70 per cent of Rosneft.
The deal includes more than 100 traders and shipping schedulers in London, New York and Singapore, over $1 billion worth of oil, and the bank’s 49 per cent stake in tanker company Heidmar.
The terms of the deal were not disclosed. Morgan Stanley said it was not expected to have a significant impact on its financial results.
The purchase will not include Morgan Stanley’s oil storage, pipeline and terminalling firm, TransMontaigne Inc., which may help avoid significant scrutiny of the deal in Washington.
The United States has often been hostile to state-owned companies from countries such as Russia and China buying up US energy and infrastructure assets.
News of the deal raised alarms in Washington. Senator Edward Markey, a Democrat who is a member of the Senate Committee on Foreign Relations, called on the US government to “closely review” the deal to ensure that a Russian state-owned oil company “cannot manipulate our markets and harm the United States and its citizens”.
The sale is also subject to regulatory approvals in the US, the European Union and certain other jurisdictions, the bank said in a statement.
Morgan Stanley has been trying to sell or spin off its physical commodity business for over a year as it faces increased regulatory pressure and higher capital requirements. The bank said it would continue to look at “strategic options” for TransMontaigne.
Restrictions on proprietary trading introduced to prevent a repeat of the 2008 financial crisis have made commodity markets less attractive for many banks, with total revenues in the sector down sharply on Wall Street in the last five years.
In buying the operations, the Russian oil producer will get its first foothold in the United States and expand its modest trading business.