When Russia’s state-controlled oil and gas conglomerate Rosneft opened up to the capitalist world following the fall of the Soviet Union in the 1990s, one its first ports of call was Dublin, where it established its subsidiary Rosneft International as early as 1996.

In recent weeks, one of the Irish unit’s Russian shareholders, a Rosneft intermediary holding company called LLC RN Developments, sent €39 million in fresh capital to Dublin. The transaction, while small by the group’s standards, is a sign that Ireland remains active as one of Rosneft’s gateways to the wider world, despite it having no employees here.

In the intervening 25 years, Rosneft’s Irish presence was briefly in the news in 2010, when a court order temporarily froze assets here as part of the mighty battle that played out in Russia at the time for the control of its privatised rival Yukos. As Russian President Vladimir Putin consolidated his power, Yukos slipped away from the hands of his opponent Mikhail Khodorkovsky, one of the so-called oligarchs who had thrived under Putin’s predecessor Boris Yeltsin and ended up spending a decade in jail for a range of white-collar crimes. 

While some remnants of the Yukos era remain on the balance sheet of Dublin-based Rosneft International, there is now more to the Russian giant’s Irish letterbox business. And it has a lot to do with two unstoppable trends: Ever closer ties between Russia and China, and the rise of Dublin as a European hub for corporate debt securitisation.

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Rosneft International’s longest-established role is that of an intermediary holding company between Rosneft’s headquarters in Moscow and a group of subsidiaries in Cyprus. These include Rosneft Worldwide Projects, a clearing house used to conduct mergers and acquisitions of various units within the group in recent years from the Mediterranean tax-efficient jurisdiction. 

Three more own transport assets: Rubio Holdings, established in Cyprus in 2005, had three oil and chemical product tankers valued at $15 million each when it last filed accounts to the end of 2019; the former Yukos subsidiary Shelf Support Shiphold owned five aircraft worth $170 million at the end of 2018 (though at least one of them, a Bombardier private jet with the tell-tale tail number M-YOIL, has since been re-registered elsewhere); and the more recet Skyline Asset Management, registered in 2018 to hold Rosneft’s more luxurious Falcon 7X executive jet.

The Irish company also holds Rosneft’s interests in some of its riskiest international joint ventures. One of them, jointly owned with Russian extractives infrastructure group Stroytransgaz, obtained a concession more than 20 years ago to explore for oil and gas along with Algeria’s state-owned Sonatrach deep in the Sahara desert – but has yet to enter production.

Venin Holdings, a business majority-owned by Rosneft’s Irish subsidiary with a 25 per cent stake for China’s Sinopec, tells a similar story. Its licence to extract oil and gas in the promising Veninsky field of Russia’s Sakhalin Pacific island has yet to report production income. Venin is financed through intercompany debt channelled via Rosneft International, with $279 million owed to the Dublin company at the end of 2019.

Taihu, another Cyprus-registered JV with Sinopec in which Rosneft holds a 51 per cent interest through Ireland, is more advanced. It took over the existing Udmurneft extraction business in central Russia and has been posting annual oil sales of over $2 billion. Its latest accounts for 2019 show a pre-tax profit of $484 million.

Dublin-based Rosneft International owns a 49 per cent interest in a final joint venture with China National Petroleum Corporation (CNPC) established in 2017. The Orient Petrochemical project was agreed four years earlier during a visit by Chinese President Xi Jinping to Russia and targets the construction of a giant refinery in the Chinese port city of Tianjin.

In the past, Rosneft International also had a wholly-owned Irish trading subsidiary, Trumpet Ltd. In its last trading year in 2017, the company purchased nearly $600 million worth of crude oil from Rosneft and shipped it to export customers. Trumpet had no employees and was managed out of an Austrian subsidiary. As it wound down in 2018 and 2019, it paid a total of $34.6 million in dividends from retained profits to Rosneft International.

The latest accounts filed by Rosneft International for 2019 showed that its only other source of income was $12 million worth of interest on intercompany debt extended mostly to Venin, and a further $77 million in loans to other group subsidiaries. 

The Irish company was in turn financed by interest-bearing loans from Rosneft’s ultimate parent, with $349 million owed at the end of 2019, leaving it with no recurrent taxable income here. Although it did return a profit in both 2018 and 2019 as a result of the final dividends paid by Trumpet, Rosneft International paid no tax in Ireland. The company reported having “accumulated tax losses of $187,546,841 (2018: $187,289,944) that are available for offset against future taxable profits”.

In 2014, western nations imposed economic retaliatory measures on Russia following its invasion of eastern Ukraine. As tensions flare up again in the region, the potential impact is reflected in the accounts of Rosneft’s two Irish companies.

Last February, Rosneft International’s going concern statement was reassuring on such geopolitical risk, declaring: “The directors also considered the impact of US and EU sanctions on Russia. Based on the assessment performed, the directors did not identify any factors that would impact the company’s going concern status.”

By the time they signed off last month on Rosneft International Finance’s annual update on the $2 billion in bond debt it channels to its Russian parent, however, the tone had changed:

“The political and economic instability witnessed in Ukraine has had and may continue to have a negative impact on the Russian economy. Certain sanctions were implemented by European Union (“EU”) and the United States of America (”USA”) against Russian officials, businessmen and companies including the Borrower, which is the Company’s only borrower. So far, these events have not had a significant impact on the Borrower’s ability to pay its obligations to the Company. Due to the difficulty of assessing the future impact of these events and any additional sanctions that might be imposed by EU and the USA in case of the continuous instability in Ukraine, the Company’s management will continue to monitor the situation and reassess any potential impact to the Company’s operations and financial position.”