Gunvor Selling Bulk of Russian Assets After Co-Founder Sanctions

Oct. 27 (Bloomberg) — Gunvor Group Ltd. plans to sell most of its Russian assets to cut connections to the nation where it was once a dominant crude trader and its billionaire co-founder was hit with sanctions over ties to President Vladimir Putin.

One of the world’s five biggest oil traders, Gunvor is re- balancing its portfolio and given a “significant portion of our investments are in Russia, over time Gunvor will be looking to sell selectively part of those assets,” company spokesman Seth Pietras said in an e-mailed statement.

The assets up for sale include the Ust-Luga terminal in the Gulf of Finland. It is one of the world’s largest rail-to-ocean oil-product shipment terminals and has captured a “significant proportion of the export of Russia-refined petroleum products,” Gunvor said in a 2013 bond prospectus.

Pietras didn’t rule out the possibility that company co- founder and former 44 percent shareholder Gennady Timchenko is a potential buyer for the assets. “We’re open to all interested parties, but we’ll be undertaking this process in an orderly and responsible manner, adhering to all relevant sanctions considerations,” Pietras said by e-mail.

Timchenko sold his Gunvor stake to fellow billionaire co- founder and Chief Executive Officer Torbjorn Tornqvist the day before he was hit with U.S. sanctions due to his close ties with Putin. Details of the transaction between Timchenko and the Swedish national haven’t been disclosed.

Connections Denied

The move to sell its Russian assets comes as Gunvor seeks to rebuff statements made by the U.S. Department of Justice in March alleging that Putin was an investor in Gunvor and may have access to the company’s funds. The trader, which is based in Cyprus and has its major trading operations in Geneva, has strongly denied any connections to Putin.

Sanctions levied against Russian citizens and companies over the Ukraine crisis mean Gunvor will be challenged to find non-Russian buyers for the assets. In addition to Ust-Luga, they include 50 percent stakes in the Novorossiysk terminal on the Black Sea coast and the Nevskaya pipeline connected to Ust-Luga, 150 kilometers (93 miles) west of St. Petersburg as well as a 30 percent interest in the Kolmar coal-mining project in eastern Siberia. Timchenko, who owns a residence in Geneva, is also an investor in Kolmar, which is expected to be the first asset sold.

Gunvor hasn’t sent any offers, Anton Kurevin, a spokesman for Timchenko, said via text message. “If there is an offer, we will study” it, he said.

Russia Shift

Thanks to contracts from Russia’s largest producer, OAO Rosneft, Gunvor once handled as much as a third of Russia’s seaborne crude-oil exports. It has reduced its exposure to the country while increasing trading in other regions and commodities such as metals, coal and iron ore. Russia now accounts for less than 20 percent of Gunvor’s trading and the company no longer trades Rosneft crude.

The asset sales won’t impact Gunvor’s current oil-trading activities in Russia and the company is looking at acquisitions in Europe, Asia, South America and the U.S., Pietras said. Gunvor may elect to sell partial stakes in the Russian assets, he said.

Timchenko told Russian news agency ITAR-TASS in August that he and Tornqvist had long been considering a possible break even before the sanctions.

“Torbjorn has a different vision,” Timchenko said in the interview. “He wants to trade all over the world while I have grown increasingly more inclined toward Russia. The divorce at Gunvor was planned beforehand but the storm gathering over my head sped it up.”

Vitol, Trafigura

While Gunvor is facing political pressures, it follows other trading houses in seeking to monetize physical-asset investments. Vitol Group, the world’s biggest oil trader, has reduced its terminals and refinery holdings by selling stakes to private equity firms. Trafigura Beheer BV, the second-largest metals trader and third-biggest independent oil trader, sold an 80 percent stake in a Corpus Christi, Texas, oil terminal for $860 million, it said last month.

Gunvor paid $56 million to acquire the Ust-Luga terminal when it was still in development, according to the bond prospectus. It financed construction of the terminal with two loans of 176 million pounds ($283 million) and $199 million. It paid $120 million for the 30 percent stake in the Kolmar coal project, the prospectus said.

The cost of Novorossiysk project to Gunvor was $93 million, the company said in the bond prospectus.

The Nevskaya pipeline project cost Gunvor about $60 million. Its parters on the pipeline which extends to Ust-Luga the Druzhba pipeline used to export Russian crude to Western Europe are AK Transneft OAO and Gazprombank that was sanctioned by the U.S. in July.

–With assistance from Elena Mazneva in Moscow and Maria Kolesnikova in London.

To contact the reporter on this story: Andy Hoffman in Geneva at [e-mail] To contact the editors responsible for this story: Will Kennedy at [e-mail] Ana Monteiro, Randall Hackley