Morgan Stanley is locked in a secret London court battle as part of an attempt to seize an oil firm in southern Russia on behalf of a group of lenders, City A.M. has learned.
The Wall Street Bank is looking to take a majority stake in Cypriot-registered Russian drilling firm, Southern Oil Company (UNK), after UNK’s parent firm, Astrakhan Oil Corporation (AOC), which is also registered in Cyprus, fell behind on payments for a $73m loan.
Morgan Stanley negotiated two credit lines for the Astrakhan Oil Corporation in 2012, with a majority chunk of shares in UNK pledged as a security. However, AOC fell behind on its payments in 2014 when the rouble crashed following Russia’s invasion of Crimea.
Morgan Stanley is now bringing a claim against AOC on behalf of the lenders at the London Court of International Arbitration, with a hearing set to take place today. The lenders are understood to include at least one company controlled by a Russian national.
If the bank is successful, AOC would be forced to hand over control of UNK’s 40 oil wells in the southern Astrakhan region of Russia, wiping out UNK equity holders.
Attempts to take control of the oil firm stretch back to 2017, but the bank’s attempts have been rejected by the Russian courts.
In the most recent attempt in October last year, Morgan Stanley’s attempt to foreclose on the majority stake in UNK was rejected by a Russian court because UNK’s licences for the Verblyuzhye oil field were deemed “strategically important” for ensuring national defence and state security in accordance with Russian law, according to translated Russian court documents seen by City A.M.
The London case highlights the bank’s work on legacy Russia projects after western firms looked to close or reduce their operations following Russia’s invasion of Ukraine last year.
Morgan Stanley ditched its Russian banking licence in 2019 but pledged at the time to continue acting as an advisor in the country.
The case against UNK shareholders is expected to conclude by the end of this year, a source close to the case told City A.M.
Morgan Stanley, UNK and AOC declined to comment.
Law firm Allen & Overy, representing Morgan Stanley, did not respond to a request for comment. Level Legal, representing AOC, also declined to comment.