Major Tory donor’s company in talks to finance sanctioned Russian oil giant
The chief executive of Vitol, which avoided huge sums in UK tax, has handed £1m to the Conservative Party
A company run by the one of the Tory Party’s biggest donors is in negotiations to finance a Russian oil company targeted by US sanctions against President Putin.
Vitol, the world’s largest oil trader, is looking to lend Rosneft $2bn in exchange for supplies of refined products over the next five years.
The deal would boost Rosneft’s cash reserves and, if agreed, could help mitigate the effect of US sanctions that wiped five per cent off the its share price when they were announced last week.
Yesterday The Independent revealed that Vitol pays a fraction of the standard UK tax rate for its hugely profitable London operations. Revelations about the firm’s tax arrangements and business dealings in Russia will risk embarrassing David Cameron, who has led calls for tighter sanctions against Moscow despite his own party’s ties with wealthy oligarchs.
Talks on the Rosneft deal began before the downing of Malaysian Airlines flight MH17 and last night the company refused to say whether they were ongoing.
“Our client relationships are confidential,” they said, adding that the “any conflict in which innocent civilians are caught up is tragic”. They said Vitol was, and would remain, “fully compliant with all applicable international laws and regulations”.
Vitol’s chief executive Ian Taylor has given the Tories around £640,000 since 2006 including over £100,000 since July last year alone. Mr Taylor is a director and a significant shareholder in Vitol so would be likely to benefit directly from the deal with Rosneft.
Last year Vitol went into partnership with another trading firm, Glencore, to give another $10bn loan to Rosneft in return for future oil supplies.
The US sanctions proscribe Rosneft from receiving new long-term loans from US banks and investors as well as targeting the company’s chief executive, Igor Sechin, who is close to President Putin.
But they do not prohibit the kind of deal envisaged by Vitol – as long as it is not financed by US banks.
The deal, if it goes ahead, will be deeply embarrassing for David Cameron.
The close links between the two companies mean that the Conservative party is indirectly benefiting from profits made in collaboration with a company with intimate links to the Kremlin.
Mr Cameron has already called on the EU to blacklist the “cronies and oligarchs” around President Putin as part of “new, hard-hitting economic sanctions” in response to the downing of MH17.
This week The Independent reported on internal documents from the company’s London headquarters showing that in the past nine years it has paid an average of just 10.5 per cent tax on its global profits, which totalled nearly $15bn (£8.8bn) over the period.
Vitol achieves this by “confirming” its deals in low-tax Switzerland even if they have been negotiated in London.
While legal, it is a technique for which the internet giant Google was strongly criticised for by the House of Commons Public Accounts Committee.
As one of the Tories’ biggest donors, Mr Taylor has privileged access to David Cameron and other senior Conservative ministers.
The Prime Minister hosted Mr Taylor at a private dinner in Downing Street on 2 November 2011, described as a “social dinner for strong and long-term supporters of the party, with whom the PM has a strong relationship”. In November last year he was invited for dinner at Chequers.
In February the former Tory Energy Minister Charles Hendry MP became a £60,000-a-year Vitol consultant.
Mr Taylor has also been one of the party’s largest and most reliable donors. In the run up to the 2010 election he gave the party £125,000 and since June last year he has given the party £116,000. Overall his donations since 2006 amount to around £1m.
Led by Igor Sechin, a former deputy prime minister of Russia and a close ally of president Vladimir Putin, Rosneft has undertaken a string of acquisitions which have transformed it into the world’s largest listed oil company.
As well as the $55bn purchase of TNK-BP, the company has in the last year bought Itera and Sibneftegas, two significant Russian gas producers, the gas business of Alrosa, the diamond miner, and refineries in Germany and Italy.
The company was targeted by the US for limited sanctions as a direct response to the situation in the Ukraine. It is a possible target for European sanctions as well although most observers believe it will be hard to get agreement among all 28 member states for such dramatic action.
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