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Last Updated: Wednesday, 2 February, 2005, 15:55 GMT
Rosneft denies China Yugansk link
Rosneft brass name plate in Moscow
Rosneft now controls a significant chunk of Russia's oil output
Confusion about the role of Chinese banks in the sale of Russia's Yuganskneftegas deepened on Wednesday.

Russian state oil company Rosneft has denied that its $6bn (3.2bn) deal to supply oil to China is linked to its takeover of oil giant Yugansk.

Rosneft was responding to government comments that the Rosneft/China oil deal was payback for a $6bn Chinese loan used to pay for Yugansk.

Russia's Ministry of Finance is now distancing itself from these comments.

Trail of money

Rosneft's deal to supply $6bn worth of oil to China is seen as part of Beijing's desire to secure long-term oil supplies to feed its booming economy.

Russia's Minister of Finance Alexei Kudrin said on Tuesday that a group of Chinese banks lent state-run Russian bank Vnesheconombank $6bn, which was in turn lent to Rosneft to help pay for Yugansk.

Rosneft said the Chinese oil order and the loan were unrelated.

It also denied that the money borrowed from Chinese banks was used to buy Yugansk. This money is to be used to finance current operations and "capital-intensive strategic projects", Rosneft said.

It added that the oil for China would not come from Yugansk but from its Purneftegaz unit.

"It appears that Mr Kudrin's responsibilities... don't encompass this deal, and thus, he's not very knowledgeable of the details," Rosneft said in a statement.

The Russian Finance Ministry responded with a statement on Wednesday, in which it said that Mr Kudrin had never said that the Chinese loan was used to buy Yugansk.

Repayment demand

Rosneft still has more debts to pay including a $5bn tax bill inherited from Yukos, Yugansk's former owner, and a $540m loan from western banks that is secured on Yugansk's oilfields.

Rosneft has confirmed to the BBC that the banks have demanded repayment of the loan.

To settle these debts Rosneft appears to be negotiating a separate deal with India's state oil firm ONGC, our correspondent says.

Reuters quoted an unnamed senior Russian oil ministry source as saying ONGC was in line to lend Rosneft $4bn and invest a further $2bn in an equity stake in Yugansk.

Yugansk was sold for $9.3bn in an auction enforced by the state last year to help the oil producer's former owner Yukos pay off a $27bn bill for back taxes.

It was sold to a little-known shell company which in turn was bought by Rosneft.

Yukos claims its dismemberment was punishment for the political ambitions of its ex-chief and former biggest shareholder Mikhail Khodorkovsky.

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