The pessimism Morgan Stanley (NYSE:MS) is facing concerning its Russian sale

The American multinational, Morgan Stanley (NYSE:MS) reported last December about its agreement with the Russian oil company OAO Rosneft (MCX: ROSN) to sell it a part of its oil trading business. The deal was delayed when tensions between the two countries increased. The deal which was to close somewhere in the second half of the year may not be carried out at all with such problems prevailing in the global community.

It has come to attention according to The Wall Street Journal that Morgan Stanley (NYSE:MS) has grown pessimistic regarding the turnout of the deal. It has until year end to get an approval from the Treasury Department’s Committee on Foreign Investment in the U.S. (CFIUS) for the sale. Sanctions have been imposed on Russia thus making it difficult for foreign companies to provide technology, equipment or assistance to the country.

A result of the sanctions was the shutdown of Exxon Mobil Corp (NYSE:XOM) and Rosneft’s (MCX: ROSN) first well which it drilled somewhere off the coast of Russia and the Arctic near the Kara Sea. The conflicts between the two countries are hitting companies hard with operations and projects stopping halfway.

Morgan Stanley (NYSE:MS) hasn’t altered its decision to sell its assets in the oil trading sector. Being one of the biggest banks in the U.S., the company took major advantage of the change in the laws of its home country in 2003 which allowed it to trade and own tangible commodities as well, and not just their contracts.

With the financial crisis in 2008 till 2009, banks have altered their status to bank holding corps from investment banks. The Federal Reserve started to review the commodities business of the banks hence making it impossible for them to continue the trading of commodities like oil and metals and other substances.

The Federal Reserve is now considering charging bank-owned commodities as well as warehouses. This is so that all banks may reduce risky as well as volatile investments in commodity trading. This is the reason that Morgan Stanley (NYSE:MS) is willing to sell to the Russian-owned oil company. The company saw its advantage in the sale and aims to carry it out yet it isn’t going as fast as the company would want it to. The bank was told by the Fed that it should sell its oil trading holdings. CFIUS however is telling Morgan Stanley (NYSE:MS) not to sell it.

The bank says that the only good thing is that this sale is immaterial to its business. Thus it won’t cause much of a loss if the transaction does not processed to completion. The company still has time to make this work though. A case which is smart enough should be presented so that its approval would be given by the CFIUS. With the delay in the sale already resulting in months of stalling, the company must set apart some resources if it wants to complete what it started, however immaterial.