Save for later Print Download Share LinkedIn Twitter Russia's state-controlled Rosneft has denied contributing to the collapse of the ruble this week amid fears of a potential financial crisis in Russia. The ruble plunged 20% against the dollar on Tuesday to a record low, despite the Russian Central Bank's move to hike interest rates to 17% from 10.5% on Monday. A combination of falling oil prices and Western sanctions have been blamed for the sharp drop in the ruble this year. But after the Central Bank's dramatic rate hike failed to stem the currency's slide, Rosneft's 625 billion ruble ($10.2 billion) domestic bond offering last week became a focal point for investors, who suspect the company used the proceeds to buy foreign currencies to repay debts to Western banks. Russian state-controlled banks are thought to have bought the bonds. Concerns also spread about cronyism in Russia's economic system given Rosneft head Igor Sechin's close ties to Russian President Vladimir Putin. Sechin called the rumors "a provocation," and Rosneft issued a statement saying "not a single ruble, raised within the bond issue, will be used to buy foreign currencies." Rosneft said the bond issue was done to finance projects in Russia and that the company itself "generates enough cash flow in foreign currencies in order to meet its loan repayment obligations" (EIF Oct.29'14). Rosneft is carrying some $60 billion in debt and its finances are being squeezed by sanctions and low oil prices. According to market sources, the company was forced to ask for state aid because it has to pay back two bridge loans it took out to finance the $54 billion takeover of TNK-BP in 2013. The loans are due this month and next. Rosneft cannot refinance them, which would be the normal course, because of Western sanctions banning it from long-term capital markets in the US and Europe. Sergei Shvetsov, first deputy governor of the Central Bank, called the ruble's decline "critical," while the International Energy Agency (IEA) had already expressed concerns about Russia's oil supply and demand outlook next year before Tuesday's run on the ruble. The IEA said Friday that Russia "is likely to trim 2015 production plans" as lower oil prices exacerbate the impact of foreign capital restraints and ruble weakness. Russia's total liquids production in 2015 is seen 70,000 b/d lower than previously thought, the IEA reckons, for a total of 10.8 million b/d, mainly due to downward revisions for Rosneft and privately owned Lukoil. Rosneft's London-traded shares dropped 13% on Tuesday to a new 52-week low of $2.8325/share. BP owns a 19.75% equity stake in Rosneft, and investment analysts say it could be forced to write down (EIF Dec.10'14).