Rosneft’ NK OAO (MCX:ROSN) Considers backing out of oil deal with Morgan Stanley (NYSE:MS)

Rosneft’ NK OAO (MCX:ROSN) is the biggest producer of crude oil in Russia, and potentially they may pull out of the deal to purchase Morgan Stanley (NYSE:MS)’s oil trading units. Sources close to the Russian company said, that this deal will make it extremely difficult to conduct financial operations on a daily basis.

Rosneft’ NK OAO (MCX:ROSN) had agreed to make the purchase, but in the past nine months, the European Union and the United States of America have imposed a wide range of sanctions on the military and Russians energy sectors, because they want to punish Moscow for its ongoing involvement in Ukraine.

Igor Sechin, the CEO of Rosneft’ NK OAO (MCX:ROSN) and an ally to Vladimir Putin, the Russian President, has been sanctioned by the United States, since April 2014, and now the company has also been added to this list, as of July 2014.

A spokesperson, representing Rosneft’ NK OAO (MCX:ROSN) has said that the deal may go through, but that the possibility is highly unlikely. Negotiations regarding this deal are still ongoing. At this time, both Morgan Stanley (NYSE:MS) and Rosneft have declined to officially comment on the current state of the negotiations.

One other major obstacle that must be overcome, before this deal can go through, is the approval required by the Committee of Foreign Investments in the United States (CFIUS). This U.S. based group regulates acquisitions and mergers that may have a direct impact on the security of the United States. Without making a commitment of rejecting or approving the deal, the CFIUS has required additional information from Morgan Stanley (NYSE:MS) and Rosneft’ NK OAO (MCX:ROSN).

Morgan Stanley (NYSE:MS) has been actively trying to sell off their oil trading division for almost 24 months. Deals with Asia and the Middle East have failed, because of operational differences, and the inability to agree on a price.

The United States is putting pressure on Morgan Stanley (NYSE:MS) to sell these units, because oil trading is becoming too risky for banks to own, due to the unpredictability of potential for oil leaks in the supertankers that may cost in billions in liability fees.

Money is not the main issue for the delay of this deal, because Rosneft’ NK OAO (MCX:ROSN) has more than enough cash on hand to make the purchase, that carries a hefty price tag of approximately $350 million, it is the excess expense that is needed to operate these types of units.

Rosneft’ NK OAO (MCX:ROSN) is applying for a loan that exceeds 42 billion dollars from the state wealth fund, to help to weather the storms of the sanctions. According to the assistant prime minister of Russia, this loan application is being given some consideration. China is willing to offer Russia a line of credit, if needed. But, for now, Rosneft’ NK OAO (MCX:ROSN) generates a steady cash flow of 30 billion dollars annually, and it meets all financial needs from resources internally.

Rosneft’ NK OAO (MCX:ROSN) opened at 233.00 a share, and the 52 week analysis ranges from 214.39 to 267.52 with a market cap of 2.47 T.