Lloyds, the bank part-owned by the Government, has withdrawn from a trade finance deal worth between £895m and £1.2bn involving the Russian oil company Rosneft, in a development that highlights the growing unease among Western banks in funding Russian deals.
Lloyds, along with Deutsche Bank, HSBC and Bank of China, was a mandated lead arranger (MLA) on the loan to finance BP's purchase of crude oil and refined products from Rosneft.
The loan would have been similar to previous deals Rosneft had with BP or the trading houses Glencore and Vitol but, according to banking sources close to the talks, Lloyds decided to walk away after several weeks of hesitation.
The bank is 25 per cent-owned by the Government, which has repeatedly condemned Russia for its actions in Crimea and eastern Ukraine. Rosneft's powerful boss Igor Sechin, a close ally of Vladimir Putin, was hit by US sanctions as part of a broader move to punish Russia for the annexation of the Crimean peninsula.
“Lloyds's decision to leave the deal is because it does not want to embarrass the Government, considering the current political situation with Russia,” said one of the bankers. “I think it was scared of going upstairs to ask permission.” BP, Rosneft and Lloyds all declined to comment.
It is not yet clear if another bank will replace Lloyds as an MLA. The loan is supported by several lenders including Japanese, European and Chinese banks. Rosneft and BP, via a specially created company, are trying to complete the financing, which is backed by Rosneft's future oil production.