How Russia's Rosneft rose to top with Kremlin's help

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Moscow (AFP)

Once a little-known firm, Russia's Rosneft has enjoyed a meteoric rise under President Vladimir Putin's rule to become the world's largest publicly traded oil company.

Headed by the Kremlin strongman's powerful ally Igor Sechin, it has scooped up some of the most prized assets in the Russian oil sector in a series of controversial deals.

Now after the government announced Rosneft's takeover of a controlling stake in sixth-biggest producer Bashneft for $5.2 billion on Wednesday, here's a look back at how its fortunes grew:

- The Yukos affair -

2004 was a big year for state-controlled Rosneft. That was when Putin appointed Sechin -- his long-time right-hand man -- the chairman of its board.

It was also just a few months after law enforcement officials dramatically arrested Mikhail Khodorkovsky, head of what was then Russia's biggest oil company Yukos.

Khodorkovsky's detention and eventual jailing on vast tax evasion charges were slammed as politically motivated, but soon the government set about breaking up his oil giant to sell off the company's alleged debts.

The main beneficiary of this enforced firesale -- Rosneft. It emerged out of obscurity to gobble up the juiciest chunks of Khodorkovsky's defunct empire at knockdown prices after a spate of fishy state-run auctions.

By 2005 the firm was the biggest producer in Russia and went public in London a year later in one of the biggest floatations ever.

The Yukos affair, however, continued to dog Rosneft for years and a long-running legal battle between the company and former Yukos shareholders was only settled in 2015.

- TNK-BP takeover -

While the devouring of Yukos transformed Rosneft into the biggest player in Russia, its next major acquirement catapulted it to the top of the league worldwide.

TNK-BP was a lucrative joint venture between the British giant BP and a consortium of Russian billionaire oligarchs.

Despite being hailed as a symbol of cooperation, it hit major problems as relations soured between the two sides. TNK-BP faced a string of lawsuits and tax probes as the battle for control intensified.

In leaked US diplomatic cables from 2008, a senior advisor to BP blamed Sechin for the standoff and said he was angling for Rosneft to take a bite out of the firm.

Eventually in 2013 someone finally came up with the cash to buy TNK-BP -- and as predicted that turned out to be Rosneft. Despite criticism from government liberals, Sechin cobbled together huge loans to slap $55 billion on the table in Russia's largest ever takeover deal.

The move made Rosneft the biggest publicly floated producer with 4 million barrels per day and saw BP bolster its stake in the firm to 20 percent.

- Controversial Bashneft sell-off -

In 2014, some ten years after the start of the Yukos affair, Russia's sixth-biggest producer Bashneft found itself in the sights of the authorities. The firm's billionaire owner Vladimir Yevtushenkov was accused of money-laundering linked to its privatisation in the early 2000s.

Eventually investigations into Yevtushenkov were dropped but a court handed over control of Bashneft -- based in the central city of Ufa -- to the state.

The ruling came as the Russian economy was already spiralling towards crisis and the government was looking for new sources of cash to cover its growing deficit.

Majority state-owned Rosneft -- suffering under Western sanctions over Ukraine -- seemed like an unlikely fit as a potential buyer in a sale aimed to swell official coffers and the idea was dismissed by some at the top.

But Rosneft is officially not a state company and Sechin has defied officials to stop him from putting in an offer for Bashneft.

Originally set for August, the sale was then suspended, with Putin insisting that "at the end of the day, the most important thing for the budget is who will pay the most".

Rosneft then stumped up $5.2 billion for just over 50 percent of Bashneft, higher than analyst estimates.

The deal could now see Rosneft's daily production rise to 5.6 million barrels a day and allow the company to dethrone gas behemoth Gazprom -- headed by Sechin's reputed foe Alexei Miller -- as the country's largest company.