Morgan Stanley sells a major portion of its worldwide physical oil trading business to Rosneft

By Nicel Jane Avellana

Dec 20, 2013 11:32 PM EST

Morgan Stanley has exited most of its global physical oil trading operations to Russia's state-run oil firm Rosneft, Reuters reported. The acquisition from the firm which is 70% owned by the state and headed by an ally of Russian President Vladimir Putin represents a bold move to enter the US market by the top oil producer of Russia, the report said.

Although the financial terms of the deal were not provided, the agreement includes over 100 traders and shipping schedulers in London, New York and Singapore, more than $1 billion worth of oil and the 49% stake it holds in Heidmar, a tanker company. Morgan Stanley said it did not expect the deal to significantly impact its financial results.

Morgan Stanley's oil storage, pipeline and terminalling company TransMontaigne Inc will not be included in the acquisition, allowing the deal to avoid a lot of scrutiny from Washington, the report said.

Reuters reported that the United State has often not welcomed Russian and Chinese state-owned firms from acquiring energy and infrastructure assets in the US. The latest deal has also raised concerns in Washington, with Democrat Senator Edward Markey calling on the government to review the deal closely. A member of the Senate Committee on Foreign Relations, Markey wants a thorough scrutiny to ascertain that Rosneft will not be able to manipulate the US markets and harm its citizens.

Citing a source knowledgeable about the deal, the report said Morgan Stanley intends to have the sale reviewed by the US Committee on Foreign Investment (CFIUS). The CFIUS is an inter-agency executive branch panel that looks into foreign investment to determine if there are possible threats to national security. In a statement, Morgan Stanley also said that the deal will still need to be approved by the US, European Union and other jurisdictions.

The report said the bank has been striving to divest or spin off its business in physical commodities for more than a year in the midst of heightened regulatory pressure and higher capital requirements.

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