An American Banker Steers Rosneft's IPO

Peter O'Brien is living proof that the Kremlin is not what it used to be -- or, at least, that Vladimir Putin's lieutenants are trying to learn how to charm investors.

O'Brien, 37, became vice president for finance at Russian state-owned oil giant Rosneft at the beginning of April, about the same time that the country's biggest foreign investor, Hermitage Capital's William Browder, announced that he had been banned from entering Russia. O'Brien's experience could not be more different. Within days of joining Rosneft, he was camped on CEO Sergei Bogdanchikov's jet, traversing Europe and the U.S. to sell investors on what may be history's biggest IPO, scheduled for later this year.

And he didn't need a lot of briefing on the numbers: His last job was heading Russian investment banking at Morgan Stanley, one of Rosneft's underwriters.

The American financier studied Russian at Duke University and spent much of the 1990s at Moscow-based investment bank Troika Dialog before heading back to Columbia University for an MBA following Russia's 1998 financial crash. The only Westerner in Rosneft's top management, he notices some immediate differences between his old and new employers, aside from language.

"Morgan Stanley is a group of smart people with a consensus on how to pursue business opportunities," O'Brien observes in an interview from Rosneft's Moscow headquarters. "At Rosneft there is leadership, and commands come from the top."

Another difference: "This is a state company, which means there's loads of paper -- not that it's necessarily worse than the e-mail at Morgan Stanley."

The paperwork that most concerns investors, O'Brien acknowledges, are the closed-door transactions that allowed Rosneft to acquire most of the crude production of fallen private sector producer Yukos in late 2004. Foreign shareholders lost an estimated $6 billion in Yukos, and Bogdanchikov is a defendant in a U.S. lawsuit brought by a group of U.S. shareholders that claims illegal confiscation. "If historical issues give rise to potential risks or investor concerns, we intend to address them in a transparent manner," O'Brien says, declining to discuss the issue in detail.

With the expanded Rosneft sitting on more reserves than ExxonMobil, the betting in Moscow is that money managers will forgive, forget and buy in. Rosneft is expected to raise between $10 billion and $20 billion in equity from a joint listing in Moscow and London.

And if it all goes wrong, O'Brien can always get another job on Wall Street.