Mnuchin Needs to Explain the 19.5% Sale of Rosneft

It’s probably not surprising to anyone given what we already knew about Rex Tillerson, but the guy identified in the leaked intelligence report as the man who was holding the Russian opposition research file on Hillary Clinton had nothing but positive things to say about Tillerson and his appointment to be Trump’s Secretary of State. It’s easy to know this because Dmitry Peskov is Vladimir Putin’s official Kremlin spokesman. This would be like Josh Earnest having the job of compiling nasty information on a Russian presidential candidate.

When Tillerson was nominated, Peskov acknowledged that Tillerson had sympathies for Russia but said that they wouldn’t matter, “being secretary of state is very different from leading a company, even a very big one. Therefore any sympathies, so to speak, become secondary.” He further vouched for Tillerson, explaining that he has many contacts with Russian officials in his capacity as CEO of Exxon/Mobil and that he “carries out his duties very professionally.”

It’s true that this leaked report should be read with some heavy skepticism, but it’s also true, as Josh Marshall points out, that the author of the piece is known and respected by the U.S. Intelligence Community, and that many of his points have already checked out.

One piece that I find tantalizing is his prediction that a 19% stake in the Russian energy giant Rosneft would be privatized and made available to Trump or his associates in return for a lifting of economic sanctions.

That piece of raw intelligence was presented on October 18th, and the actual privatization of 19.5% of Rosneft actually took place on December 10th.

The deal, if not its details, was in the works for quite some time and possibly public enough for a very well informed and clever intelligence officer to “fit the facts” to make it look retroactively damaging. The actual deal is extraordinarily convoluted and has caused head scratching in Russia.

It involves ostensible investment by Swiss giant Glencore and something called the Qatar QIA fund, with financing by Russian banks and an Italian bank. There was a bond sale of Rosneft to raise money which was then reinvested as loans issued by Russian banks to the foreign investors. A series of shell companies were created and somehow the actual ownership seems to have shifted to a company in Singapore (use Google Translate).

Running down what actually happened here is a job for investigators at the Treasury Department or perhaps the Central Intelligence Agency, but it was done at least in part to raise funds that could be transferred into the Russian treasury to cover operating expenses, as Putin explained in his annual year-end press conference:

The ink’s still drying on the $11 billion sale of 19.5 percent of state-controlled Rosneft PJSC to Glencore Plc and Qatar’s sovereign wealth fund…

…The first such agreement in 15 years will bring at least 1 trillion rubles ($16 billion) to Russia’s treasury, according to VTB Capital and Morgan Stanley estimates. Putin played a key role in the process, talking to global leaders and Russia’s oil executives, according to Energy Minister Alexander Novak and the Kremlin.

At a minimum, the deal concerned the U.S. because it appeared to violate the sanctions imposed on Russia. Immediately after the deal was announced, White House spokesman Josh Earnest said:

“The thing I can confirm for you is that the experts at the Treasury that are responsible for constructing and enforcing the sanctions regime will carefully look at a transaction like this,” Earnest told reporters. “They’ll look at the terms of the deal and evaluate what impact sanctions would have on it.”

What’s most intriguing is that the former British intelligence officer who wrote the intelligence reports that have now been leaked had reported a 19% stake as the offer made to Trump through his emissary Carter Page. Either that number was floated somewhere in the press or that’s a remarkable coincidence or the intelligence was good and the promise was kept.

Obviously, the Treasury Department is looking at this deal very carefully, but the power at Treasury is about to come under Trump’s control. Trump’s Treasury nominee, the secretive hedge fund manager and former Goldman Sachs executive Steve Mnuchin, will need to be grilled on these topics during his confirmation hearings. They need to ask Rex Tillerson about this, too.

Martin Longman

Martin Longman is the web editor for the Washington Monthly and the main blogger at Booman Tribune.