Oil firms keep up Gunvor trade after U.S. sanctions target co-founder

LONDON (Reuters) - Oil companies are reviewing their dealings with Russian commodities trader Gunvor but have not altered their business links, industry sources said on Friday, after the United States imposed sanctions on its billionaire co-founder.

The United States added Gennady Timchenko to its sanctions list on Thursday, to put pressure on Russia over the annexation of Crimea, forcing him to sell his near 50 percent Gunvor stake to Chief Executive Officer Torbjorn Tornqvist this week to keep it running.

Following the sanctions and stake sale, oil major Royal Dutch Shell reviewed whether it could still deal with Swiss-based Gunvor, which trades crude oil, refined oil products and other commodities including natural gas and coal.

"Following verification of the divestment of Mr Timchenko's shareholding in Gunvor, transactions with Gunvor are not affected by the sanctions imposed by the U.S. on Mr. Timchenko," Shell said in an internal email. "Transactions with Gunvor can therefore proceed unrestricted."

A Shell spokesman declined to comment on what he described as leaked information but added: "Shell monitors trade controls and sanctions closely and will respond appropriately to ensure that we comply with all applicable international sanctions and related measures."

Gunvor was active in the oil market on Friday, buying a cargo of gasoline from France's Total in Asia and selling gasoil in Europe.

A senior trader with a European oil company said it was assessing the situation, although he did not see an immediate impact. "The fact Timchenko sold out makes things easier," said the trader, who did not want his company to be named.

Another European oil company, Lundin Petroleum, which shares a stake in a Russian oil development with Gunvor, said its business relationship with the firm was not affected.

Timchenko, 61, was listed by Forbes as the 61st richest person in the world this month, with an estimated fortune of $15.3 billion (9.2 billion pounds). Gunvor is not a well-known name outside of oil and commodities trading circles.

Gunvor handles around 3 percent of the world's oil. Its counterparties and banks include Goldman Sachs and Vitol SA. It trades commodities on U.S. exchanges, and enters into derivatives and swaps transactions with the biggest players in energy and banking.

On a conference call with investors on Friday, Gunvor sought to reassure bondholders, saying the U.S. Treasury had said Gunvor itself is not subject to legal sanctions.

"We had a great deal of support. The banks had to digest the situation. They saw we are not in the sanctions list and that we made steps to ensure continuity of the business," Gunvor's spokesman said. "It is not business as usual yet but we are on the path to it," he added.

Gunvor also said on the call that no clients had declined to do business with it, a source who listened to it said.

Bond traders priced in a greater risk of default on Gunvor's $500 million of notes due in May 2018, with yields jumping to above 10 percent from around 7.5 percent before the sanctions on Timchenko were announced.

U.S. FIRMS STILL TRADING

U.S. firms were continuing to trade with Gunvor too, although sources said they may be more wary. Top U.S. oil company Exxon was still trading with the firm, a source said.

Chevron had no immediate comment on the status of any trading with Gunvor, while ConocoPhillips said it acts in full compliance with U.S. law.

The U.S. Treasury cautioned Americans on Thursday against conducting transactions with a Russian firm that may be controlled by an individual under sanctions, even if that person does not hold a majority stake.

"U.S. persons are advised to act with caution when considering a transaction with a non-blocked entity in which a blocked person has a significant ownership interest that is less than 50 percent or which a blocked person may control by means other than a majority ownership interest," a Treasury spokesperson said.

Timchenko, who co-founded Gunvor in 1997, was among several Russian businessmen placed under U.S. sanctions on Thursday, over Russia's intervention in Ukraine. The U.S. Treasury said Russian President Vladimir Putin has investments in Gunvor.

On Thursday, Gunvor said it was outraged by the Treasury's linkage of Putin with the company and that Timchenko's stake sale was made to "ensure with certainty the continued and uninterrupted operations" of Gunvor.

Gunvor grew spectacularly over the last decade with a turnover of $93 billion in 2012 compared with $5 billion in 2004.

It traded large volumes of oil of Russian state companies such as Rosneft at the end of last decade but since then ceded its leading positions and now focuses on trading in Europe and Asia.

(Additional reporting by Seng Li Peng in Singapore, Julia Payne, David Sheppard, Sujata Rao-Coverley and Simon Falush in London, Dmitry Zhdannikov in New York; Writing by Alex Lawler; Editing by Veronica Brown and Anthony Barker)

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