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July 18, 2007, 12:01 a.m. EDT

Rosneft's Delay In Eurobond Sale Sparks Questions

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By Lidia Kelly and Geoffrey T. Smith

MOSCOW -- OAO Rosneft's decision late Monday to postpone its debut Eurobond placement could prove ill-timed and was dictated mainly by its rivalry with OAO Gazprom, analysts said.

Rosneft became the highest-profile Russian casualty yet of global bond-market turmoil Monday, pulling its planned $2 billion two-tranche offer as investors sought more insurance against further rises in U.S. bond yields. Its action followed cancellations by OAO Bank VTB and Bank of Moscow, both also pinched by a rise in yields amid concern about U.S. subprime lenders.

But analysts said Rosneft could still have gone ahead with its offer because emerging debt markets have withstood most of the impact from U.S. volatility. They attributed the Russian state-controlled oil producer's postponement to its desire to borrow at the same price as Gazprom.

"I believe these guys are too ambitious," said Alexander Kudrin , head of fixed-income research at Moscow's Troika Dialog. "It's impossible to compare those two companies."

Gazprom's benchmark 2016 issue traded late yesterday at around 6.57%, 1.54 percentage points above the comparable U.S. Treasury issue. Both companies are state-owned, but Gazprom's debt is rated one level higher by Moody's Investors Service.

Marina Loukashova , deputy head of investor relations at Rosneft, played down the rivalry with Gazprom. "Basically, we didn't like the price," Ms. Loukashova said. "Fortunately, we aren't in a desperate need for financing, so we can wait."

Write to Geoffrey T. Smith at geoffrey.smith@dowjones.com

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